# credit_cards by fanzhongqing

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```									         Financial Planning:
Credit Cards

AVID Standard 1.2 Plan for ongoing personal and academic development
American Debt

• The median credit card debt is about
\$2,000
• This means 50% of Americans have less
than \$2,000 in credit card debt and the
other 50% of Americans have more than
\$2,000 in credit card debt.
Average American Income

• Less than 9th grade education: \$20,000
• Bachelor’s Degree: \$57,000
• Professional Degree: \$120,00

http://www.buzzle.com/articles/average-american-income.html
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
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)
Statistics

• The average interest rate is about
16.75% A.P.R. (Annual Percentage Rate)
• As of 2008, the average number of credit
cards Americans have is 3.5
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?
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
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
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
Breakdown of Credit Scores
Score?
Carefully

• Look for errors. Write your credit card
company immediately.
• Has your rate been increased?
• Check your balance. Know what you
owe
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.
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
Ignore the Free Checks

• They aren’t free.
• They are almost the same as a cash
• Interest accumulates immediately
Say No to Skip Payments

• Usually occur before or after holidays
• Interest is still being added to your
balance
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
Stop Using Credit

• Paying off your balance is difficult if you
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

• Transfer your balance to a credit card
with a lower interest rate*.
• *be careful about introductory rates
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.
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
paid back in full in 30 days!
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)