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Get Smart About Credit

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Marsha A. Goetting Marsha A. Goetting Ph.D., CFPPh.D., CFP®®, CFCS, CFCSMarsha A. Goetting Marsha A. Goetting Ph.D., CFPPh.D., CFP®®, CFCS, CFCS

Professor & Extension Professor & Extension Family Economics Family Economics SpecialistSpecialistDepartment of Department of Agricultural Economics & Agricultural Economics & EconomicsEconomics

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Warm up & fun questions about credit

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Question What is the averageWhat is the average combined education loans combined education loans & credit card balances for& credit card balances for

college seniors?college seniors?

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Average combined Average combined education loans & education loans & credit card debtcredit card debt

Average combined Average combined education loans & education loans & credit card debtcredit card debt

$20,402

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Graduating seniors Graduating seniors student loanstudent loan debt debtGraduating seniors Graduating seniors student loanstudent loan debt debt

$17,140

77

Graduating seniors Graduating seniors credit cardcredit card debt debtGraduating seniors Graduating seniors credit cardcredit card debt debt

$3,262

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Question How many credit cards How many credit cards does average American does average American household use?household use?

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Credit Cards the Credit Cards the Average household Average household uses uses

Credit Cards the Credit Cards the Average household Average household uses uses

8

1010

Question What’s the average What’s the average creditcredit card balance card balance owed by American owed by American households?households?

1111

Credit Card Credit Card Balance…Balance…Credit Card Credit Card Balance…Balance…

$8,000

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Question What is the average What is the average credit card balance credit card balance of senior citizens? of senior citizens?

1313

Senior Citizen Senior Citizen Balance Balance Senior Citizen Senior Citizen Balance Balance

$4,041

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Question What percent of credit What percent of credit card holders say they card holders say they hardly ever pay the hardly ever pay the balance in full?balance in full?

1515

Hardly ever pay in Hardly ever pay in fullfullHardly ever pay in Hardly ever pay in fullfull

35%

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Packet Contents

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Credit Card

Smarts Calculator Credit Card

Smarts Calculator

Special Special FeatureFeature

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Blue Side--Side 1

Paying Just 2% Paying Just 2% on Your Credit on Your Credit Card DebtCard DebtCheck the Check the REALREAL cost cost

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Credit Card Debt

JulieJulie$2,000$2,000

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Side 1-BluePay Back: $6,183Pay Back: $6,183Interest Charges: Interest Charges: $4,183$4,183

Years to pay off: 23Years to pay off: 23

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Yellow Side 2

Pay MORE than Pay MORE than 2% and Save a 2% and Save a LOTLOT

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Side 2-Yellow$2,000 debt$2,000 debtFirst payment: $40First payment: $40Years in debt: 23Years in debt: 23Interest paid: $4,183 Interest paid: $4,183

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Boost to 3%First payment: $60First payment: $60Years in debt: 11Years in debt: 11Interest paid: $1,654Interest paid: $1,654Interest saved: $2,529Interest saved: $2,529

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Double Minimum

First payment: $80 First payment: $80 Years in debt: 8 Years in debt: 8 Interest paid: $1,051 Interest paid: $1,051 Interest saved: $3,132 Interest saved: $3,132

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Worksheet--White

My Credit My Credit Card Card SituationSituation????????????

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$ for extra payments

Purple WorksheetPurple Worksheet The Case of the Missing Money, The Case of the Missing Money,

or the $645 Snack, or Where or the $645 Snack, or Where Can I Find Money to Boost My Can I Find Money to Boost My Monthly Credit Card PaymentsMonthly Credit Card Payments

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$ for extra payments

List the ItemList the Item Cost per dayCost per day Cost per week (day x 5 or 7)Cost per week (day x 5 or 7) Cost per month (week x 4)Cost per month (week x 4) Cost per year (month x 12)Cost per year (month x 12)

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Credit ReportFact Sheet Fact Sheet (salmon color) (salmon color)

How to Get Your How to Get Your Free Credit ReportFree Credit Report

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3 Nationwide agencies

Annual Credit Annual Credit Report Report Report Report Request FormRequest Form

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Credit ScoreFact Sheet (green)Fact Sheet (green)What Does Your What Does Your Credit Score Say Credit Score Say About YouAbout You

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FICO ScorePayment historyPayment historyAmount owedAmount owedLength of credit historyLength of credit historyNew creditNew creditTypes of credit in useTypes of credit in use

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Boosting Scores Pay bills on timePay bills on time Keep low balancesKeep low balances Pay off debtPay off debt Apply for new only Apply for new only when neededwhen needed

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Debt

Fact sheetFact sheet(dark yellow)(dark yellow)

How much debt is How much debt is too muchtoo much??

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Debt RatioA. Outstanding loan A. Outstanding loan balancebalance

B. Take home payB. Take home payC. Divide A by BC. Divide A by B

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Debt ratio1/3 limit1/3 limit

Of what’s left after Of what’s left after you’ve paid your you’ve paid your basic living expensesbasic living expenses

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Question Housing DebtHousing Debt1/4 to 1/3 of monthly 1/4 to 1/3 of monthly take home paytake home pay

3737

Housing Debt Shouldn’t be more Shouldn’t be more than 2 to 2 ½ times than 2 to 2 ½ times before-tax annual before-tax annual incomeincome

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PowerPayFact SheetFact SheetReduce Your Debts Reduce Your Debts the PowerPay Waythe PowerPay Way

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Pay credit payments as usual First loan: $150First loan: $150 Second loan: $50Second loan: $50 Third loan: $75Third loan: $75 Total $275Total $275

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PowerPay When first loan is When first loan is paid off, that payment paid off, that payment is applied to the next is applied to the next loanloan

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First Loan Paid Off First loan: 0First loan: 0 Second loan: Second loan: $150 + $50 = $200$150 + $50 = $200

Third loan: $75Third loan: $75

Total $275Total $275

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PowerPay When loan 2 is When loan 2 is paid off, add that paid off, add that payment to next payment to next loanloan

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Second Loan Paid Off

1st & 2nd loan: 01st & 2nd loan: 0 Third loan: $275Third loan: $275 ($150 + $75 + $50)($150 + $75 + $50) Total $275Total $275

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PowerPay Continue Continue until all loans until all loans are paid offare paid off

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Benefits Reduce time on loanReduce time on loan Save in interest Save in interest costscosts

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3 Ways

On-lineOn-linePurchase CDPurchase CDComplete formComplete form

4747

Selecting a Credit Card MontGuide

199802

Fact SheetFact Sheet

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Purposes 11. . Compare credit Compare credit

card terms already card terms already accepted with offers accepted with offers received in mail and/or received in mail and/or over phoneover phone

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Purpose

2. Find credit cards 2. Find credit cards with terms best suited with terms best suited for your spending & for your spending & repayment habitsrepayment habits

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Federal Truth in Lending Law

Federal Truth in Lending Law

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Schumer BoxSchumer BoxAPR

19.9%

GracePeriod

Not less than 25days

FinanceCharges

.50

Annual Fees

$20 per year

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Schumer Box Annual Percentage RateAnnual Percentage Rate Grace PeriodGrace Period Minimum Finance ChargesMinimum Finance Charges Balance Calculation MethodBalance Calculation Method Annual FeesAnnual Fees Fees for Cash AdvancesFees for Cash Advances Late Payment FeesLate Payment Fees

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Packet Feature

Credit Card TrackerCredit Card TrackerDateDateDescription of chargeDescription of chargeAmount ChargedAmount Charged

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Packet sponsors MSU Extension ServiceMSU Extension ServiceFirst Interstate First Interstate

BancSystem FoundationBancSystem FoundationMontana Credit Unions for Montana Credit Unions for

Community DevelopmentCommunity Development

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EvaluationBlue FormBlue FormReturn in envelope by Return in envelope by April 15 April 15 eligible for $100 savings eligible for $100 savings bondbond

5656

Get Smart About Credit

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