1 Staying on Good Terms: Managing Credit and Debt

2 Types of Credit Open End Credit Short Term: electric and phone bills Revolving: credit cards, and retail cards Closed End Credit: Automobile, Mortgage, and Student Loans

3 Buy/consume now, pay later Establish favorable credit history Protect against fraud Cope with emergencies The Upside of Credit Use

4 The Downside of Credit Use The price of credit is high – KNOW the APR! Additional fees add to the cost Credit makes it easy to overspend You are vulnerable to fraud

5 College Students and Credit: What We Know 84% have at least one credit card Half have 4 or more credit cards Average outstanding balance of $3,173 89% incurred finance charges by carrying a balance 55% of Georgia college students had debt, an average of $17,296; 74% of graduating seniors had debt Parents are borrowing too Sources: Project on Student Debt, Sallie Mae

6 All Cards Are NOT Created Equal Credit Credit Cards Charge Card Debit ATM Card Check Card

7 Other Types of Plastic Cards Stored Value Card Smart Cards

Credit Card Accountability, Responsibility, and Disclosure (The CARD) Act of 2009 Restrictions on interest rate increases on existing debt Restrictions on late fees Eliminates universal default Statements must go out 21 calendar days in advance of the due date 45 day notice on rate hikes 8

Credit Card Accountability, Responsibility, and Disclosure (The CARD) Act of 2009 Eliminates fees for processing payments Eliminates over-the-limit fees –Unless consumer asks for account to allow over-the-limit transactions Rates cant be raised for the first year after account is opened –Unless creditor uses a promotional rate Reasonable payment allocation –Apply payments to highest rates Mandatory 5 year life for gift cards

Credit Card Reform, Continued Among other provisions, those younger than 21 wont be able to get a credit card unless: –A parent or guardian co-signs OR –The young adult can prove s/he has independent means to make payments Permission from co-signer required to increase credit limits 10

Credit Card Reform, Continued Prohibits card issuers from offering freebies like food or trinkets when marketing on campus Stops prescreened credit card offers for consumers under 21

12 Credit Myths Once paid, bad debt will go away Im not responsible for debts on joint accounts or co-signed accounts if they arent my purchases Credit is what got me into this mess Credit card companies wouldnt send me offers if I couldnt afford it If I dont use credit, I wont be able to buy anything

13 Ten Credit Mistakes 1.Overspending 2.Holding too many credit cards 3.Making only minimum payments 4.Carrying a permanent balance 5.Assuming low interest rates stay the same Continue...

14 Ten Credit Mistakes 6.Paying a higher interest rate than necessary 7.Paying extra for incentive credit cards 8.Not reading the disclosure statement 9.Paying off the wrong credit cards first 10.Ignoring extra fees or penalties

15 Beware of Higher Cost Credit Tax Refund Loans Rent-to-Own Car Title Loans Bounced Check Protection

16 Signs of Credit Trouble Maxing out credit cards Using one card to pay the balance on another Not knowing your total debt Borrowing from family members to pay debt Getting frequent cash advances

17 Staying Out of Credit Card Trouble Shop for the credit card with the best terms. Consider: - Annual Fee - APR - Rewards Program Dont charge perishable items Pay off as much as possible every month

18 Pay As Much As You Can! Balance: $3,000 Interest Rate: 18% % of Balance Paid Each Month InterestTime to Pay Off 2.0%$7,93037 years, 7 months 4.0%$1,71610 years, 10 months 5.0%$1,2408 years, 4 months

19 Timing Makes a Difference Dont buy on impulse Notify your creditors if you cant make your payments on time Report lost/stolen cards immediately

20 Other Credit Card Management Suggestions Store your credit cards in a safe place Report lost/stolen cards immediately: –Fair Credit Billing Act limits liability on your credit card to $50. Track your charges Document your concerns in writing Talk to your creditor: –ask them to lower your credit limit –ask them to change when your bill is due

21 Credit and Debt Counseling Services Budget Counseling Debt Repayment Plan –You agree to not use the cards –The debt counselor may arrange for you to make smaller payments and pay less interest and fees. –You pay the debt counselor who pays your creditors –The debt counselor will not put the repayment plan on your credit report BUT creditors may

22 For individual help with serious debt problems, contact: CredAbility CCCS

23 For more information, contact: The Peer Financial Counseling Program (insert web address, phone number, and/or )

24 Special Thanks to...