1. Financial Planning: Credit Cards

2. PART 1: DEBT

3. American Debt Credit cards $15,482 $927 billion Mortgages $181,176
Debt balances are current as of June 2018
Type of debt
Total owed by average U.S. household carrying this type of debt
Total debt owed by U.S. consumers
Credit cards
$15,482
$927 billion
Mortgages
$181,176
$9 trillion
Auto loans
$27,669
$1.24 trillion
Student loans
$46,950
$1.41 trillion
Any type of debt
$134,058
$13.29 trillion

4. Average American Income

5. College Students & Credit
The average age at which a U.S. consumer gets their first credit card is 21
84% of college students have credit cards
The average undergraduate student has $2,200 in credit card debt
The average college graduate has $4,100 in credit card debt
The average college graduate has nearly $20,000 in debt

6. How Long Would It Take?
Pretend you owe $9,000 to your credit card company
If the interest on your credit card is 18%
The minimum payment is $135 per month.
How long would it take to pay off the $9,000 debt and finance charges?

7. How Long Would It Take?
Trick question! You will NEVER pay off the $9,000 debt paying the minimum payment of $135 per month.
Do the math: $9,000 x .18 = $1,620 finance charge.
$1,620 divided by 12 = $135 per month

8. Statistics
The average interest rate is about 14.98% A.P.R. (Annual Percentage Rate)
As of 2008, the average number of credit cards Americans have is 3.5
The average credit card debt per borrower in the U.S. is $4,996 in 2012

9. The Cost of Time
Let’s say you owe $3,000 on a credit card with a 15% interest rate
If you make the minimum payment of $75, it would take Over 4 ½ years to pay off your credit card!

10. Credit Card Debt Illustration
Running Time 3:24

11. Part 2: FICO Score

12. Financial Management Training
84% of undergraduates indicated they needed more education on financial management topics. In fact, 64%would have liked to receive information in high school
(Source: Sallie Mae, "How Undergraduate Students Use Credit Cards," April 2009)

13. Credit Scores
The FICO score is one such popular scoring method. Its scale runs from 300 to 850.
The vast majority of people will have scores between 600 and 800.
A score of 720 or higher will get you the most favorable interest rates on a mortgage

14. Breakdown of Credit Scores

15. What Makes Up Your Credit Score?

16. Part 3: How to avoid the Credit Card=DEVIL

17. What are Fees?
Fees are how credit card companies make money off of you. Some of the most common fees include:
Application fee
Annual fee
Cash advance fee
Going over your credit limit
Late fee
Finance charge (interest)
Returned check fee

18. Sample Credit Card Offer

19. Read Your Statement Carefully
Look for errors. Write your credit card company immediately.
Has your rate been increased?
Check your balance. Know what you owe

20. Credit Card Tips
Pay on time. Late payments negatively affect your credit score. There may be fees for late payments.
Avoid cards with annual fees.

21. Say No to Skip Payments Usually occur before or after holidays
Interest is still being added to your balance

22. Reject Offers to Increase Your Credit Line
Increasing your credit line is like having a whole cake in front of you to eat instead of a small piece.
Small Credit Line
Large Credit Line

23. Credit Card Tips Ask yourself, “Do I really need this?”
Make more than the minimum payment
Avoid reaching the credit card limit. Keep a portion of your credit limit for emergencies
Late fees may also put you over your credit limit and raise your rates

24. Stop Using Credit
Paying off your balance is difficult if you keep adding to it.
Use your debit card or cash instead

25. Reduce the Interest Rate
If you have a long history with the credit card company and have made payments on time, call and ask for a rate reduction

26. Transfer Your Balance
Transfer your balance to a credit card with a lower interest rate*.
*be careful about introductory rates

27. Credit Cards Rules of Thumb
Never borrow more than 20% of your annual net income (after taxes)
For example, if your annual net income is $9,600, you should not have a debt load more than $1,920
Your monthly debt payments should never be more than 10% of your monthly net income.

28. Credit Cards Safety Tips
Don’t let anyone use your card
Instead of signing the back of the card, write “Check I.D.”
Check your credit scores at least once a year to check for errors. It is free (once a year)

29. Credit Cards Can Be Good
Establishes credit history
- Helpful in the future when you go
to buy a house or a car
Some credit cards give you cash back
You can borrow money for free if it is paid back in full in 30 days!

30. Request Copies of Your Credit Report