1. Charge It Right FDIC Money Smart for Young Adults
Building: Knowledge, Security, Confidence

2. What is the first thing you think of when you see the words…
CREDIT CARD

3. Cash, Credit, or Don’t Buy?

4. Corkboard ME…
Copy the address on the SMART board and post two things you know about credit cards…
Once the website opens, simply click on the screen to add a post-it. Then double click and type your response! It’s that simple!

5. What is Credit?
Opportunity to obtain money, goods or services without having cash in exchange for promise to pay in future.
Credit 101 Quiz

6. Did you know… Additional facts (Creditcard.com)
Average credit card debt: $15,279
Nearly two in five Americans (39 percent) carry credit card debt from month to month
77 percent of the adult population of the U.S. has credit card
Most Americans have four or more credit cards
About 60% consumers pay off bill in full each month
The average outstanding credit card balance of college students reported in 2012 was $755
27 percent of all college students surveyed in spring 2012 had a credit card in their own name
In 2012: Number of bankruptcy filings was 1,261,140 (down 14% from 2011)
Additional facts (Creditcard.com)

7. Credit Card Characteristics
Convenient form of borrowing
1959: Bank of America introduced 1st revolving credit card
Make unlimited number purchases up to pre-approved amount
When pay, amount goes back up to limit
Require a minimum payment each month
Percentage of balance

8. Debit Card & Prepaid Card Characteristics
Introduced 1984
Tied to checking account
Immediately withdrawn
Prepaid Card:
Put money on card
Pay as you go until 0 value
Reload card with more money

9. Activity 2: Which Card is This?
Credit cards Debit cards PrePaid cards
Load card with money and pay as you go
PrePaid Card
Tied to checking account
Debit Card
Has a spending limit and can be paid back over time?
Credit Card

10. Secured and Unsecured CardsVS
Secured card:
Require collateral or deposit to obtain credit
$500 limit and $500 in savings
Can get secured credit with no credit history or negative history
Unsecured card:
Do not require collateral or deposit to obtain credit
Usually need good credit history

11. Student Credit Cards Low (or no) introductory interest rates
Average interest rate: %
Cash back bonuses
Some offer no income requirements and no co-signer needed
Typically low credit limit
Often no annual fee
Images changed

12. Rewards Cards
Are offered by hotels, airlines, and/or your credit card company directly
Earn points for amounts charged on card toward free or discounted travel, hotel, or other goods and services
Usually charge annual fee
May give cash rebates
Average Interest Rate: %

13. Pre-Approved Card Offers
Offers from creditors that you might be able to get advertised interest rate and limit based on viewing your credit report
Actual terms depend on income, employment and credit history
National Average Interest Rate: 14.2% (Dec.2013)
Bad Credit Interest Rate: 23.64% (June, 2013)
use to find nat avg interest rate
bad credit rate found

14. There are NO Guarantees!
Pre-Approved Offers
There are NO Guarantees!
“Pre-approved” but must still qualify for card
Read agreement carefully
Shop around! Don’t always take first offer
May be hidden costs such as transfer fees

15. Before Applying… Decide what use for Not free money
Loan and must pay back with INTEREST
Find out interest rates and credit limit
Opt out prescreened offers
Call OPTOUT
Shred unwanted applications

16. Where can you find credit card offers?
Direct mail
Online ads/pop-ups
Retail store check out lines
Magazines
Newspaper
Booths at sporting events, theme parks
Booths or tents at colleges
Malls

17. How do credit card companies sell you to get their card?
Low or 0% introductory rates
Cash back bonus
No annual fees
Personalized or stylized cards
Free products
Hats, t-shirts, reduced air fare tickets

18. Shopping for the Best Deal
Credit cards have different terms:
Annual percentage rate
(APR)
Fees
Grace period
Balance computation method
Cash advance requirements and fees
Balance transfer requirements and fees
Hand out Sample Credit Card Forms

19. The Fair Credit & Charge Card Disclosure Act
Requires lenders to disclose APR, cash advances, and annual fees
Must include box describing key features and costs and disclose terms in writing
Schumer Box
More Info…

20. APR (Annual Percentage Rate)
Cost of borrowing money
Low Introductory rates
Teaser Rates
Must state how long introductory APR lasts
APRs are fixed or variable
Charge different rates for different types of transactions

21. APR (Annual Percentage Rate) (cont’d.)
Penalty APR
Increase in APR if payment is made late or exceeds credit limit
Penalty APRs are about 52% higher than regular APRs
Universal Default
If you are late paying other loans (such as house, car, phone, APR rate will increase on card
policy, even if credit card payment was not late

22. Fees Annual fees Late fees Over-the-limit fees Balance transfer fees
Cash advance fees

23. Grace Period
Specified number of days to pay your balance before credit card company starts charging interest and fees
Free 25 days
Grace Period
Costing you money!

24. Balance Computation Method
States how interest is determined
Most common is average daily balance method

25. Cash Advance Ability to get cash from credit card
Usually fee for service
Example: “2%/$10” means 2% of the cash advance amount or $10, whichever is more
APRs on cash advances are typically much higher
No Grace Period – interest begins immediately!

26. Balance Transfer
Moving unpaid debt (amount of money you owe) from one card to another
Encouraged by some companies using low rates on transferred balances
Be weary of transfer fees!

27. Truth in Lending Disclosure
Mandates disclosure of information about cost of credit
Finance charge
APR
Payments and payment schedule
Protects against unauthorized use
If lost or stolen, max. amount liable $50

28. Other Factors to Consider
Customer service
Access to account Information
Bill Payment
Update personal information
Problem resolution
Additional protection
Lose your job & unable to pay bills
Lose card
Identity is stolen

29. Tips to Think About When Choosing a Card
How and when you will use card
Start small
Understand terms before accept card
Beware of introductory rates
Beware of application fees
Understand fixed and variable rates
Credit Card Simulator

30. Application Requirements
Individual credit – based on assets, income, and credit history
Joint credit – based on assets, income, and credit history of two people who apply
Typically, you must be at least age 21 to apply

31. Credit Report – A record of how you paid your debts…

32. Credit Report – What is it?
A record of how you paid your debts…

33. Credit Report – What’s on it?
A record of how you paid your debts…
Identifying Information
Name, current and previous address, SS number, DOB, current and past employers, spouse info
Credit Information
Accounts with banks, retailers, credit card issuers, utility companies, mortgage, student loan,
Date opened, Credit limit, Co-signers
Payment pattern over past two years
Public Record Information
Bankruptcy, tax liens, monetary judgments
Recent Inquiries
Name of those who obtained copies of your credit report within past year

34. Credit Reporting Agencies
Fair Credit Reporting Act
Requires each of 3 agencies to provide FREE copy of report
Equifax
Sample
Experian
TransUnion

35. You may also get FREE copy if…
Denied credit, insurance or employment
Unemployed and plan to look for job within 60 days
Receiving public assistance
Report inaccurate b/c of fraud or identify theft

36. Credit Score Determines credit risk Determined by your credit report
Two types
FICO (Fair Isaac Corp)
VantageScore
Check your score before applying

37. The national average FICO score was 646 as of July 2013
Scores range from 300 to 850
The higher your score, the better
Great
Very Good
Good
Not Good
Bad
The national average FICO score was 646 as of July 2013

38. The national average VantageScore was 750 in 2012
New as of March 2006
Used by all three reporting agencies
Should be the same score from each agency
Scores range from 501 to 990
Number score goes with a letter grade
Example: = A, = F
The national average VantageScore was 750 in 2012

39. Denied Credit?
Poor credit history
Not at current address or job long enough
Income not high enough
60 Days to contact credit bureau to receive free copy of credit report!

40. How long does information stay on my credit report?
Suits, judgments, tax liens, arrest
records, collection agencies
7 years
Bankruptcy
10 years
You have right to dispute any incorrect information with credit agency and/or company

41. Using Your Credit Card Responsibly
Protect card and account numbers
Draw line through blank spaces on charge slips
Tear up or shred receipts
Keep a record of account information
Carry only cards you think will use
Avoid having more than two cards!
Pay off balance monthly
Do not exceed credit limit

42. Need Help with Credit Card Problems?
Pay off high interest rate loans first!
Pay using cash or check
Credit counselor
Enroll in DMP (debt mgt program)
Regular, timely payments
48 months or more
Beware of Debt Consolidation traps

43. Lost or Stolen Credit Card
Lost or stolen – Notify credit card company immediately
Do not give personal or account information over phone
Suspect fraud – Notify credit card company immediately
Liable for at most $50 per card if notify immediately
If contact before any unauthorized charges made, liable $0

44. Identify Theft Make charges to account without knowing
Take years to clear up
Be careful providing personal info
on-line
over phone
FTC ID Theft video

45. Paying Your Bill: The Credit Limit
$ Fees $
Credit Limit: maximum amount creditor is lending you
Charged over-the-limit fees
May reduce credit score

46. Minimum Payment Practical Money Skills Original Balance APR
Monthly Payment
Total Number
of Monthly Payments
Total
Interest
Paid
Total Years to Pay Off
Total of Payments
$2500
18%
Minimum Payment $38
291 $
24.3 $
$50 94 $
7.8 $
$100 32
$656.80
2.7 $
Practical Money Skills

47. Finance Charge Calculation
You need a
current newer calculator such as T1
Finance Charge Calculation
APR= 18%; 30 days; $200 balance
Divide Interest rate by 365/year
.18/365 days = (daily interest rate)
Take the daily interest rate and multiply it by the number of days between billing cycles.
X 30 days = (periodic interest rate)
Multiply balance by periodic rate
$200 X = $2.96 finance charge

48. Try this… 30 Days $18.49 $2.47 $7.40 $23.01 APR = 15% Balance = $1500
Finance Charge =
APR = 12%
Balance = $250
Finance Charge =
$18.49
$2.47
30 Days
APR = 18%
Balance = $500
Finance Charge =
APR = 10%
Balance = $2800
Finance Charge =
$7.40
$23.01

49. Fair Debt Collection Practices Act
Prohibits debt collectors from using abusive, unfair, or deceptive practices to collect
Debt collector
Someone who regularly collects debts owed
Collection agencies
Lawyers who collect debts on regular basis
Companies that buy delinquent debts and try to collect them

50. What types of debts are covered?
Personal
Family
Household debts (personal credit card account, auto loan, medical bill, and mortgage)
Can a debt collector contact me any time or any place?
No.
May not contact at inconvenient times or places,
Before 8 am or after 9 pm, unless agree.
May not contact at work if they’re told (orally or in writing) that not allowed to get calls there.

51. Credit Card Statement
Front – Shows detailed activity that happened for billing cycle
Back – Describes terms, how interest is calculated, and contact information
Credit card statement video

52. Fair Credit Billing Act Errors on Your Statement
Addition to Truth in Lending Act
Requires prompt credit for payments and error corrections
Dispute billing errors and withhold payment for damaged goods

53. To take advantage of the law's consumer protections, you must:
Write creditor at address given for "billing inquiries,“
Include name, address, account number and description of billing error
Send letter to creditor within 60 days after first bill containing error was mailed
Send letter by certified mail, return receipt requested,
Proof and include copies (not originals) of sales slips or other documents that support position.
Keep a copy of dispute letter.
Creditor must acknowledge complaint in writing within 30 days after receiving it, unless problem resolved.
Must resolve dispute within two billing cycles (but not more than 90 days) after receiving letter.

54. New Credit Card Laws video
Credit Card Act of 2009
Est. new rules and amend previous
Requires changes on disclosures
Limits on fees and rate increases
Requires consistency in payment dates and times
EX: under 21 must demonstrate able to make payment or have a co-signer
New Credit Card Laws video

55. Keep Good Records
Receipts
Check for mistakes

56. Corkboard ME…
Copy the address on the SMART board and post TWO things you LEARNED about credit cards…
(Once the website opens, simply click on the screen to add a post-it. Then double click and type your response! It’s that simple!)