microsoft powerpoint - abc presentation march 2009.ppt [read

The State Treasurer’s Office Presents

Ron CraneIdaho State TreasurerIdaho State Treasurer

THE ABC’S OF CREDIT THE ABC’S OF CREDIT

CARD FINANCINGCARD FINANCING

Essential Facts for StudentsEssential Facts for Students

Presented by State Treasurer’s OfficePresented by State Treasurer’s Office

Liza Liza CarberryCarberry, Investment Manager, Investment Manager

March 2009March 2009

ESSENTIAL FACTS….ESSENTIAL FACTS….

�� Planning a BudgetPlanning a Budget

�� Understanding Credit CardsUnderstanding Credit Cards

–– What are the costs?What are the costs?–– What are the costs?What are the costs?

–– How to wisely Choose a credit cardHow to wisely Choose a credit card

–– Rates, Fees and the Schumer BoxRates, Fees and the Schumer Box

�� Dos and Don’tsDos and Don’ts

�� There is always a solutionThere is always a solution

PLANNING A BUDGETPLANNING A BUDGET

Monthly BudgetMonthly Budget

Monthly IncomeMonthly Income Academic ExpensesAcademic ExpensesAllowance______________ Tuition_____________Allowance______________ Tuition_____________

School Loan____________School Loan____________ School Meal Plan______School Meal Plan______

Salary_________________Salary_________________ Books/Supplies_______Books/Supplies_______Salary_________________Salary_________________ Books/Supplies_______Books/Supplies_______

Scholarships____________ Loan Payments_______Scholarships____________ Loan Payments_______

TOTAL INCOME__________ TOTAL ACADEMIC______TOTAL INCOME__________ TOTAL ACADEMIC______

PERSONAL EXPENSESPERSONAL EXPENSES

Rent_________________Rent_________________ Transportation_________Transportation_________

Utilities_______________Utilities_______________ Movies_______________Movies_______________

Phone________________ Insurance_____________Phone________________ Insurance_____________

Internet_______________Internet_______________ Laundry______________Laundry______________

Car Payment____________Car Payment____________ Entertainment_________Entertainment_________

Food__________________Food__________________ Spending Money________Spending Money________

Clothing_______________Clothing_______________ TOTAL PERSONAL______TOTAL PERSONAL______

MONTHLY BUDGET MONTHLY BUDGET SUMMARYSUMMARY

�� TOTAL INCOME _______________TOTAL INCOME _______________

�� TOTAL EXPENSES_______________TOTAL EXPENSES_______________

�� AMOUNT LEFT OVER_____________AMOUNT LEFT OVER_____________

UNDERSTANDING UNDERSTANDING CREDIT CARDS?CREDIT CARDS?

�� ProsPros–– ConvenienceConvenience

–– Car RentalsCar Rentals

–– HotelsHotels

–– OnOn--line shoppingline shopping

–– Sense of securitySense of security

–– Credit HistoryCredit History

�� ConsCons–– Excessive debtExcessive debt

–– Poor credit score and long termPoor credit score and long term

financial responsibilityfinancial responsibility

CREDIT CARD CREDIT CARD COSTSCOSTS

COSTS:COSTS:

�� Annual FeesAnnual Fees

�� InterestInterest

–– Annual Percentage Rate (APR)Annual Percentage Rate (APR)–– Annual Percentage Rate (APR)Annual Percentage Rate (APR)

�� Average Daily Balance MethodAverage Daily Balance Method

�� Cash AdvancesCash Advances

�� Convenience ChecksConvenience Checks

�� Default RatesDefault Rates

�� Low Interest Teaser RatesLow Interest Teaser Rates

�� Balance TransfersBalance Transfers�� Balance TransfersBalance Transfers

�� Late FeesLate Fees

�� Over Credit Limit FeesOver Credit Limit Fees

�� Bounced Check FeesBounced Check Fees

�� Currency Conversion FeesCurrency Conversion Fees

�� Pay by Phone FeePay by Phone Fee

WHAT ARE YOUR WHAT ARE YOUR LIABILITY LIMITS?LIABILITY LIMITS?

�� Lost or stolen cards Lost or stolen cards -- $50 (provided by $50 (provided by the federal Truth in Lending Act) the federal Truth in Lending Act) –– no no need to purchase insurance to cover need to purchase insurance to cover need to purchase insurance to cover need to purchase insurance to cover amounts over $50amounts over $50

�� Billing Errors Billing Errors –– The federal Fair Credit The federal Fair Credit Billing Act covers billing errors Billing Act covers billing errors –– you you do not have to pay the amount of do not have to pay the amount of error or any interest on that amounterror or any interest on that amount

CHOOSING A CHOOSING A CREDIT CARDCREDIT CARD

LOOK FORLOOK FOR

–– A Low Annual Percentage Rate (APR)A Low Annual Percentage Rate (APR)

–– No Annual FeeNo Annual Fee–– No Annual FeeNo Annual Fee

–– A Long Grace PeriodA Long Grace Period

–– Average Daily Balance MethodAverage Daily Balance Method

–– Low Penalty Rates or feesLow Penalty Rates or fees

WHAT ABOUT AFINITY WHAT ABOUT AFINITY CARDS?CARDS?

�� Cards that offer points that are converted Cards that offer points that are converted into frequent flyer miles or into merchandiseinto frequent flyer miles or into merchandise

�� The decision to choose an afinity card The decision to choose an afinity card �� The decision to choose an afinity card The decision to choose an afinity card depends on what the other features aredepends on what the other features are–– What is the interest rateWhat is the interest rate–– What are other costsWhat are other costs–– Is there an annual feeIs there an annual fee

�� Shop and compare before you decide!Shop and compare before you decide!

TYPES OF CREDIT CARD TYPES OF CREDIT CARD USERSUSERS

�� Convenience UsersConvenience Users

�� “Revolvers”“Revolvers”�� “Revolvers”“Revolvers”

RATES & FEES AND THE SCHUMER RATES & FEES AND THE SCHUMER BOXBOX

Annual Percentage Rate (APR) for Purchases This rate only applies to purchases and can be a fixed rate or

variable rate

Other APR’s The “Other APR’s” box contains information on APR’s for

balance transfers, cash advances, convenience checks, and

default rates. These rates can either be fixed or variable.

Grace Period for Repayment of Balances for Purchases The grace period applies only to balances for purchases. You

only receive a grace period if you pay your new balances in full

each billing period by the due date.

Method of Computing the Balance for Purchases Most issuers use the Average Daily Balance Method, including

new purchases. Some issuers use the Two-Cycle Average Daily new purchases. Some issuers use the Two-Cycle Average Daily

Balance Method.

Annual Fees Many issuers do not charge an annual fee. Others may offer the

first year with no annual fee with a charge thereafter.

Minimum Finance Charge A minimum charge on any balance that remains unpaid.

Usually, it only applies when interest charge is less than the

minimum charge.

Transaction Fee for Balance Transfers An up-front fee assessed for making a balance transfer.

Transaction Fee for Cash Advances An up-front fee assessed for requesting a cash advance. ( The

same fee typically applies to convenience checks.)

Late Payment Fee A fee assessed when a payment is received by the issuer after

the due date.

Over-the-Credit Limit Fee A fee assessed when one goes over their credit limit and

charged monthly until the account is brought under its limit.

International Transaction A fee (usually 3%) assessed on each foreign currency purchase

after it has been converted into U.S. dollars.

DO’S AND DON’TS ONCE DO’S AND DON’TS ONCE YOU HAVE A CREDIT YOU HAVE A CREDIT

CARDCARD

�� One CardOne Card

�� Student Loans for TuitionStudent Loans for Tuition

�� Want vs NeedsWant vs Needs�� Want vs NeedsWant vs Needs

�� ConvenienceConvenience

�� Pay More Than the MMPPay More Than the MMP

�� Be a ManagerBe a Manager

�� Don’t Skip PaymentsDon’t Skip Payments

�� Pay on TimePay on Time

�� Don’t Exceed Your Credit LimitDon’t Exceed Your Credit Limit�� Don’t Exceed Your Credit LimitDon’t Exceed Your Credit Limit

�� Cash AdvancesCash Advances

�� Convenience ChecksConvenience Checks

�� Be Wary of Teaser RatesBe Wary of Teaser Rates

�� Credit Card ShuffleCredit Card Shuffle

�� Low Credit LimitLow Credit Limit

�� Quickly Mail PaymentsQuickly Mail Payments�� Quickly Mail PaymentsQuickly Mail Payments

�� Save ReceiptsSave Receipts

�� Change of AddressChange of Address

�� Lost and Stolen CardsLost and Stolen Cards

THERE’S ALWAYS A THERE’S ALWAYS A SOLUTIONSOLUTION

GETTING OUT OF DEBTGETTING OUT OF DEBT

�� Don’t Deny the ProblemDon’t Deny the Problem

�� Stop Using Your CardStop Using Your Card

�� Contact Your Credit Card IssuerContact Your Credit Card Issuer�� Contact Your Credit Card IssuerContact Your Credit Card Issuer

�� Get a JobGet a Job

�� Reduce ExpensesReduce Expenses

�� Talk about Your ProblemsTalk about Your Problems

�� Debt ConsolidationDebt Consolidation

CREDIT REPORTS & CREDIT REPORTS & CREDIT SOURCESCREDIT SOURCES

CREDIT REPORTCREDIT REPORT

�� Collection of InformationCollection of Information

�� Financial Report CardFinancial Report Card�� Financial Report CardFinancial Report Card

�� Lenders Use this InformationLenders Use this Information

�� 3 Main Credit Reporting Agencies3 Main Credit Reporting Agencies

�� Regularly Review Your Credit ReportsRegularly Review Your Credit Reports

CREDIT SCORECREDIT SCORE

�� Numeric Value Applied to a Credit Numeric Value Applied to a Credit �� Numeric Value Applied to a Credit Numeric Value Applied to a Credit ReportReport

�� Usually Called a FICO ScoreUsually Called a FICO Score

�� Higher is BetterHigher is Better

WHAT GOES INTO OUR WHAT GOES INTO OUR CREDIT SCORES?CREDIT SCORES?

�� Pay Bills on TimePay Bills on Time�� Pay Bills on TimePay Bills on Time

�� Unresolved DebtUnresolved Debt

�� Number of Cards and Their BalancesNumber of Cards and Their Balances

�� How LongHow Long

�� Quest for New CreditQuest for New Credit

CONSEQUENSES OF CONSEQUENSES OF IRRESPONSIBLE IRRESPONSIBLE IRRESPONSIBLE IRRESPONSIBLE CREDIT CARD USECREDIT CARD USE

�� Denial of CreditDenial of Credit

�� High Interest RatesHigh Interest Rates

�� The Universal Default ClauseThe Universal Default Clause�� The Universal Default ClauseThe Universal Default Clause

�� Difficulty Renting an ApartmentDifficulty Renting an Apartment

�� Denied EmploymentDenied Employment

�� Graduate School RejectionGraduate School Rejection

�� Higher Insurance PremiumsHigher Insurance Premiums

�� Big Bucks for Cell PhonesBig Bucks for Cell Phones

IDENTITY THEFTIDENTITY THEFT

SIGNS OF IDENTITY THEFTSIGNS OF IDENTITY THEFT

�� Card/Statement Not RequestedCard/Statement Not Requested

�� Statement Not ReceivedStatement Not Received�� Statement Not ReceivedStatement Not Received

�� Unauthorized ChargesUnauthorized Charges

�� Denied ChargesDenied Charges

�� Debt CollectorsDebt Collectors

MINIMIZE THE RISK…MINIMIZE THE RISK…

�� Keep Personal Information PersonalKeep Personal Information Personal

�� Don’t Use Social Security NumberDon’t Use Social Security Number

�� Leave Social Security Card HomeLeave Social Security Card Home�� Leave Social Security Card HomeLeave Social Security Card Home

�� Carry Only What’s NeededCarry Only What’s Needed

�� Photo ID Credit CardPhoto ID Credit Card

�� Know Your Billing CyclesKnow Your Billing Cycles

�� Shred ReceiptsShred Receipts

�� Use the Post OfficeUse the Post Office

�� Creative PasswordsCreative Passwords�� Creative PasswordsCreative Passwords

�� Purchase on Secure WebsitesPurchase on Secure Websites

�� Keep Personal Information SafeKeep Personal Information Safe

�� Review Credit ReportsReview Credit Reports

�� Computer Virus ProtectionComputer Virus Protection

VICTIMS OF IDENTITY VICTIMS OF IDENTITY THEFT SHOULD…THEFT SHOULD…

�� Contact the Big ThreeContact the Big Three

�� Fraud AlertFraud Alert�� Fraud AlertFraud Alert

�� Order Free Credit Reports & ReviewOrder Free Credit Reports & Review

�� Call Fraud DepartmentsCall Fraud Departments

�� Close Fraudulent AccountsClose Fraudulent Accounts

�� File a Police ReportFile a Police Report

�� Contact the FTCContact the FTC

QUESTIONS?QUESTIONS?