financial roadmap. agenda credit cards and interest student loans what happens if you don’t...
TRANSCRIPT
FINANCIAL ROADMAP
AGENDA
Credit cards and interest Student loans What happens if you don’t pay: Credit
scores Taking control of your money
CREDIT CARD USAGE
The average interest rate across all existing credit card accounts was 13.46% as of May 2007
Total US consumer revolving debt reached $904 billion in June 2007
Source: Federal Reserve
High interest rates Easy to spend money you don’t have Credit rating risk Credit card fraud
CREDIT CARD DISADVANTAGES
Secured vs. unsecured card Interest rate vs. teaser rate Grace period Credit limit Fees
Annual fee Late fee Over-the-limit fee
READ THE FINE PRINT
Carrying a balance increases the cost of the item you purchase How can that be?
$2,000 balance 18% APR $80 minimum payment
4% of balance
CREDIT CARD EXAMPLE
APR = Annual Percentage Rate The yearly rate at which interest will be charged on the
balance Payments are due monthly
Divide 18% by 12 to get monthly interest (1.5%) Multiply 0.015 by $2,000
$30 is the finance charge for one month How long will it take to pay $2,000 if you only pay the
minimum?
UNDERSTANDING INTEREST
Minimum payment of $80 $50 goes to getting out of debt Minimum decreases month to month Takes 9.5 years to pay off $2,000 Costs over $1,100 in interest
Freeze $90 per month instead You will pay off $2,000 in 2.3 years Costs just over $450 in interest
MINIMUM PAYMENT TRAP
STUDENT LOANS
Repayment Plans Standard Graduated Income-sensitive Extended
STUDENT LOANS
Grace period Forbearance Deferment
Unemployment In-school Economic Hardship
STUDENT LOANS
Where are my loans? National Student Loan Data System
www.nslds.ed.gov 1.800.4FED-AID Credit reports
CREDIT REPORTS
Three different credit bureaus: Equifax, Experian, Trans Union Creditors report, usually on a monthly basis Information sent by creditors who choose to
report Loans (education, auto, home) Credit cards Cell phones Collection agencies
CREDIT REPORTS
What’s included on a report? Personal information Account Information Inquiries Public Records and Collection Item
CREDIT REPORTS
Personal information Name, current and past addresses, current and
past employers, other names used Account Information
Current creditors, open and recently closed accounts
Status, payment amount, payment history
CREDIT REPORTS
Inquiries When someone pulls your credit report Soft inquiries Hard inquiries
Public records Charged-off accounts, unpaid child support,
bankruptcy, unpaid tickets, evictions
CREDIT SCORES
CREDIT SCORES
Credit improves for two reasons: Positive information is added Negative information drops off over time
Check your report Dispute errors 100-word statement
IMPORTANT LESSONS
Where is my money going? How do I make it go where I want or need it
to go?
Write down the cost of everything you buy for 1 month
Try not to change your spending habits
$5 lunch
X 5 each weekday
$25 per week
$25 lunches per week
X 50 weeks a year
$1250 per year
TRACK YOUR SPENDING
Needs and wants are different for different people
Is this a want or a need? Restaurants and fast food Clothes Entertainment Gifts Cell phone
NEEDS AND WANTS
SUMMARY
Where is my money going? How do I make it go where I want or need it
to go? Credit cards Student loans Savings
