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 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  FED-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 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

QUESTIONS   