bad credit car

GLAD Greeks Learning to Avoid Debt g BROUGHT TO YOU BY ALPHA PHI ALPHA KAPPA ALPHA PSI DELTA SIGMA THETA ZETA PHI BETA IOTA PHI THETA ALPHA KAPPA ALPHA OMEGA PSI PHI PHI BETA SIGMA SIGMA GAMMA RHO CARE PROGRAM NATIONAL ASSOCIATION OF BANKRUPTCY TRUSTEES NATIONAL FOUNDATION FOR CREDIT COUNSELING NATIONAL PAN-HELLENIC COUNCIL WHAT ARE GOOD REASONS TO HAVE CREDIT CARDS? REASONS TO HAVE CREDIT CARDS • Convenience • Safety - Usually a $50 limit on liability • If used properly will help build a good credit rating • Internet purchases • Emergencies BUT UNWISE USE OF CREDIT LEADS TO PROBLEMS TEST YOUR FINANCIAL KNOWLEDGE True or False T F l GLAD • All credit cards charge the same annual rate of interest (APR) on the balance due. FALSE • Different banks charge g different rates. Other important terms, including annual fees late fees and fees, late payment grace period, may differ. • Compare card terms: www.cardtrak.com. S dt k See also smartmoney.com GLAD • If you pay your credit card balance in full each month, it doesn’t matter what rate of interest the bank charges on your credit card. TRUE • Since you only pay interest on the unpaid amount each month, you never pay any interest charge if you pay the y y entire debt. • Banks hate this. • You pay no interest on a debit card purchase. TRUE A debit card works just like a check check. Your ATM Y card is probably a b bl debit card. GLAD There is a credit report on everyone over the age of 18. FALSE Only people who have established h t bli h d a credit history have credit reports. GLAD • I don t really need to worry about my credit don’t rating now, since I don’t plan to buy anything on credit while I’m in school I m school. FALSE • Credit decisions you make now will be important if y p p you plan to buy a car or make any other major purchase in the next 7 years GLAD • A few late payments on your credit card will have no effect on your account. FALSE • Typically interest rates jump if you pay late or miss even one payment. • PLUS – you may also owe late charges. GLAD • A couple of missed payments on your credit card won’t h t your credit rating, as dit d ’t hurt dit ti long as you eventually pay the balance. FALSE • That negative information can legally remain on your report for up to 7 tf t years. • Lenders will consult y your credit report to p determine whether to give you credit, and how much to charge charge. GLAD • If you apply for a car loan, the lender will probably review your credit report. TRUE • People who lend you money will almost always review your y y credit report. If your credit is poor your interest rate will be higher. • Y may receive f You i free copies of your credit report each year year. GLAD • When you apply for a job, your prospective job employer may review your credit report. TRUE • A prospective employer can review your credit report if you give written authorization. authorization • More employers are asking t see credit ki to dit reports. • What happens if you refuse to let employers see report? GLAD • Bouncing just one check won’t cause you credit problems. dit bl FALSE • Bouncing a check could result in your being flagged by reporting agencies for up to 5 years years. • Businesses will not accept your checks in the future. GLAD Today the average college student owes several th l thousand d ll d dollars i credit card in dit d debt. TRUE • Credit card debt is rising rapidly among y young adults. g • Don’t fall into the trap of spending money p g y you don’t have. • Doing so may lead you to bankruptcy court. WHAT ARE THE CONSEQUENCES OF BAD CREDIT? BAD CREDIT COSTS YOU! • If they can get credit people with bad credit, credit scores pay more: – Student loans – Car loans – Credit card accounts – Home mortgages A POOR CREDIT RATING MEANS • You may be unable to get student loans y g • You may pay higher interest on car loans • You may pay more for insurance • Your credit card interest rates will be much higher, even if you succeed in getting credit • You may be passed over for jobs • You may be declined for apartments and mortgage loans SO HOW DO I AVOID HAVING CREDIT PROBLEMS? WANTS VS. NEEDS • To prepare an effective budget, distinguish your wants from your needs. f d • J t because you can Just b charge something it does not mean you y can afford to pay for it. WHAT IF YOU BOUGHT ... • Speakers • CD player • Tuner • TOTAL: $1,200 $500 $300 $2,000 GLAD • Suppose you use your credit card to buy the system and you make monthly payments of $300 $300. • Assume you never miss a payment and the your credit card’s annual percentage rate is 8%. WHAT WILL THE SYSTEM COST YOU? HOW LONG WILL YOU PAY FOR IT? GLAD • Your total cost will be $2052 It will take you SEVEN MONTHS to pay for it GLAD • Now assume that because of your credit that, rating, the account bears interest at a rate of 24% 24%. • Also assume that you pay only the MINIMUM MONTHLY PAYMENT of $50. HOW LONG WILL IT TAKE YOU TO PAY FOR THE STEREO? HOW MUCH WILL YOU END UP PAYING FOR THE SYSTEM? GLAD • It will take you 82 MONTHS • Almost SEVEN YEARS • TOTAL PAYMENT: $4,062 • DOUBLE THE PURCHASE PRICE! COMPARISON • Your choices: • Pay $2,000 cash • Pay $2,052 over seven months • Pay $4,062 over seven years WORTH IT? • Your shopping spree cost $500 and you charged it to your credit card with an 18% interest. • The minimum payment is $20 per month • It will take 32 months for the debt to be paid and your total payout is $631.40. • If you are making $15/hr and taxed at 25%, it will take you 56.1 hours to earn enough to p y for y g pay this shopping spree and the finance charges. HELPFUL TIPS • Limit the number of credit cards. • Cancel unused cards. – They are security risks. – They affect your credit score, even if you do not use them. • Use credit only for essential purchases, or pay off the entire debt each month. THE SENSIBLE CREDIT PLAN • Shop for a credit card with the best terms. – Interest rate – Fees – Grace period for payments • E t bli h good credit b using a checking account, a Establish d dit by i h ki t debit card and if using a credit card is necessary, paying all charges on time. • Check your credit report yearly and correct errors – it’s free once a year! IT IS NOT A MAGIC CARPET GLAD SPONSORS CARE PROGRAM NATIONAL ASSOCIATION OF BANKRUPTCY TRUSTEES NATIONAL FOUNDATION FOR CREDIT COUNSELING NATIONAL PAN HELLENIC COUNCIL WEBLINK www.careprogram.us p g