$$$$$$$$$$$$
Get Smart
About Credit
Revised 2005
$$$$$$$$$$$$
Warm up &
fun questions
about credit
Average combined
education loans &
credit card debt
$20,402
Marsha A. Goetting
Ph.D., CFP®, CFCS
• Professor & Extension
Family Economics
Specialist
• Department of
Agricultural Economics &
Economics
Question
• What is the average
combined education
loans & credit card
balances for college
seniors?
Graduating seniors
student loan debt
$17,140
Question
Graduating seniors
credit card debt
• How many credit cards
does average American
household use?
$3,262
Credit Cards the
Average household
uses
Question
•
8
Question
Credit Card Balance…
•
$8,000
What’s the average
credit card balance
owed by American
households?
What is the
average credit card
balance of senior
citizens?
Senior Citizen
Balance
Question
• What percent of credit card
$4,041
Hardly ever pay in
full
holders say they hardly ever
pay the balance in full?
$$$$$$$$$$$$
Packet Contents
35%
Special Feature
Credit Card
Smarts
Calculator
Blue Side--Side 1
• Paying Just 2% on
Your Credit Card
Debt
• Check the REAL cost
Credit Card Debt
Side 1-Blue
• Julie
• $2,000
• Pay Back: $6,183
• Interest Charges:
$4,183
• Years to pay off: 23
Yellow Side 2
• Pay MORE than
2% and Save
a LOT
Side 2-Yellow
• $2,000 debt
• First payment: $40
• Years in debt: 23
• Interest paid: $4,183
Boost to 3%
Double Minimum
• First payment: $60
• First payment: $80
• Years in debt: 8
• Interest paid: $1,051
• Interest saved: $3,132
• Years in debt: 11
• Interest paid: $1,654
• Interest saved: $2,529
Worksheet--White
• My Credit Card
Situation
• ??????
$ for extra
payments
•
•
•
•
•
List the Item
Cost per day
Cost per week (day x 5 or 7)
Cost per month (week x 4)
Cost per year (month x 12)
Three Nationwide
Agencies
• Annual Credit
Report Report
Request Form
$ for extra
payments
• Purple Worksheet
• The Case of the Missing Money,
or the $645 Snack, or Where Can
I Find Money to Boost My
Monthly Credit Card Payments
Credit Report
•Fact Sheet
(salmon color)
•How to Get Your
Free Credit Report
Credit Score
• Fact Sheet (green)
• What Does Your
Credit Score Say
About You
FICO Score
Boosting Scores
• Pay bills on time
• Payment history
• Amount owed
• Length of credit history
• New credit
• Types of credit in use
• Keep low balances
• Pay off debt
• Apply for new only
when needed
Debt
Debt Ratio
• Fact sheet
• (Dark yellow)
• How much debt is
too much?
• A. Outstanding loan
balance
• B. Take home pay
• C. Divide A by B
Debt ratio
Question
• 1/3 limit
• Of what’s left after
you’ve paid your
basic living expenses
•
Housing Debt
• 1/4 to 1/3 of monthly
take home pay
Housing Debt
• Shouldn’t be more than
PowerPay
2 to 2 ½ times before-tax
annual income
• Fact Sheet
• Reduce Your Debts
the PowerPay Way
Pay credit
payments as usual
PowerPay
• First loan: $150
• Second loan: $50
• Third loan: $75
•
Total
$275
First Loan Paid Off
• First loan: 0
• Second loan:
• $150 + $50 = $200
• Third loan:
$75
•
Total
$275
• When first loan is
paid off, that payment
is applied to the next
loan
PowerPay
• When loan 2 is
paid off, add that
payment to next
loan
Second Loan Paid Off
• 1st & 2nd loan: 0
• Third loan:
$275
• ($150 + $75 + $50)
•
Total
$275
Benefits
PowerPay
•
Continue until
all loans are
paid off
3 Ways
• Save in interest costs
• On-line
• Purchase CD
• Complete form
Fact Sheet
Purposes
• Reduce time on loan
Selecting a Credit Card
MontGuide
199802
1. Compare credit card
terms already accepted
with offers received in
mail and/or over phone
Purpose
2. Find credit cards with
terms best suited for
your spending &
repayment habits
Federal Truth
in Lending
Law
Schumer Box
Schumer Box
APR
Grace Finance Annual
Period Charges Fees
Not less
19.9% than 25
days
.50
$20 per
year
Packet Feature
• Credit Card Tracker
• Date
• Description of charge
• Amount Charged
• Annual Percentage Rate
•
•
•
•
•
•
Grace Period
Minimum Finance Charges
Balance Calculation Method
Annual Fees
Fees for Cash Advances
Late Payment Fees
Packet sponsors
• MSU Extension Service
• First Interstate BancSystem
Foundation
• Montana Credit Unions for
Community Development
Evaluation
• Blue Form
$$$$$$$$$$$$
Get Smart
About Credit
Revised 2005