credit_cards by fanzhongqing


									         Financial Planning:
            Credit Cards

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

  • The median credit card debt is about
  • 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
  • High school graduate: $32,000
  • Bachelor’s Degree: $57,000
  • Professional Degree: $120,00

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

  • 84% of undergraduates indicated they
  needed more education on financial
  management topics. In fact, 64%would
  have liked to receive information in high

       (Source: Sallie Mae, "How Undergraduate Students Use Credit Cards," April 2009)

  • 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
  • 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
  off your credit card!
Credit Scores

  • The FICO score is one such popular
  scoring method. Its scale runs from 300 to
  • 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
Breakdown of Credit Scores
What Makes Up Your Credit
Read Your Statement

  • Look for errors. Write your credit card
  company immediately.
  • Has your rate been increased?
  • Check your balance. Know what you
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
  • 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
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
  keep adding to it.
  • Use your debit card or cash instead
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

  • 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
  • You can borrow money for free if it is
  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
Request Copies of Your Credit


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