Credit Cards: Credit Cards: Friend or Foe?Friend or Foe?

University of NebraskaUniversity of NebraskaCooperative ExtensionCooperative Extension

Community LessonCommunity Lesson

Credit Card ConcernsCredit Card Concerns

Senior citizens are slowly drowning in debtSenior citizens are slowly drowning in debt 53.8% of senior households carry some debt53.8% of senior households carry some debtHalf of those households are over $20,000 in Half of those households are over $20,000 in

debtdebtDebt is up 164% since 1992Debt is up 164% since 1992Seniors are not living extravagantly, but their Seniors are not living extravagantly, but their

expenses are rising at double-digit ratesexpenses are rising at double-digit rates

Seniors Turning to Credit CardsSeniors Turning to Credit Cards

Seniors are turning to credit cards to cover Seniors are turning to credit cards to cover rising costsrising costs

Retirees ages 55 to 64 average $6,900 in Retirees ages 55 to 64 average $6,900 in credit card debtcredit card debt

Americans over 65 aren’t in as much debt, Americans over 65 aren’t in as much debt, but at least half carry a debt of $2,000 or but at least half carry a debt of $2,000 or more.more.

Stolen Identity Stolen Identity or Lost Credit Cards or Lost Credit Cards

A lost or stolen credit card, or A lost or stolen credit card, or worse – having one’s identity worse – having one’s identity stolen, can cause financial stolen, can cause financial woeswoes

Emotional stress caused by Emotional stress caused by these challenges can be very these challenges can be very overwhelmingoverwhelming

Goals and ObjectivesGoals and Objectives

““Credit Cards: Friend or Foe?” is Credit Cards: Friend or Foe?” is designed to help participants develop designed to help participants develop techniques to: techniques to:

limit credit card debtlimit credit card debt

limit fees paid to credit card limit fees paid to credit card companies,companies,

protect personal identity.protect personal identity.

Discussion QuestionsDiscussion Questions

Share experiences of a credit card Share experiences of a credit card challenge or identity theft.challenge or identity theft.

Why is the management of credit Why is the management of credit cards important to people our age?cards important to people our age?

What concerns you about having What concerns you about having and using a credit card?and using a credit card?

Rules for Discussing Rules for Discussing Financial MattersFinancial Matters

Encourage and respect everyone’s Encourage and respect everyone’s participation.participation.

Personal examples shared during Personal examples shared during the presentation are not to be the presentation are not to be shared with others.shared with others.

Affirm an individual’s choice about Affirm an individual’s choice about owning and using a credit card.owning and using a credit card.

Rules for Discussing Financial Rules for Discussing Financial MattersMatters

Encourage you to share the educational Encourage you to share the educational components of the presentation with components of the presentation with others.others.

Seek help if you are at financial risk. Help Seek help if you are at financial risk. Help is available from professionals and family.is available from professionals and family.

Group ScenariosGroup Scenarios

Divide participants into four Divide participants into four groups. Have each group groups. Have each group discuss a different scenario discuss a different scenario and questions.and questions.

Have each review their scenario Have each review their scenario and report their thoughts to the and report their thoughts to the entire group.entire group.

Esther’s “Wants” vs. “Needs”Esther’s “Wants” vs. “Needs”

What are Esther’s “needs”?What are Esther’s “needs”?

What are Esther’s “wants”?What are Esther’s “wants”?

What does Esther think are her “needs” What does Esther think are her “needs” and “wants”?and “wants”?

Ester’s “Wants” vs. “Needs”Ester’s “Wants” vs. “Needs”

How could Esther have avoided the problem How could Esther have avoided the problem of not having enough to pay her electric bill?of not having enough to pay her electric bill?

Do you think filing out a credit card Do you think filing out a credit card application for $1000 of instant credit is the application for $1000 of instant credit is the right thing for Esther to do?right thing for Esther to do?

Would Esther be wise to explore other living Would Esther be wise to explore other living arrangements? If so what should she arrangements? If so what should she consider?consider?

Selecting and Using a Credit Selecting and Using a Credit CardCard

Recommend that you send your payment 7 to Recommend that you send your payment 7 to 10 days before the due date.10 days before the due date.

Electronic payment should be made 2 to 3 Electronic payment should be made 2 to 3 days before the due date to ensure payment days before the due date to ensure payment being credited to the account and no late fees being credited to the account and no late fees charged.charged.

Review details of cash advance fees. Interest Review details of cash advance fees. Interest may be charged as well as a fee (check may be charged as well as a fee (check minimum fees) for the cash advance minimum fees) for the cash advance transaction.transaction.

Credit Card WrapCredit Card Wrap

Make a credit card wrap by cutting a recipe Make a credit card wrap by cutting a recipe card to wrap around your credit card.card to wrap around your credit card.

Record each purchase or cash advance to Record each purchase or cash advance to the credit card, just as you would a check in the credit card, just as you would a check in a check register.a check register.

Keep a running balance of what is charged on Keep a running balance of what is charged on your credit card each month. Do not over your credit card each month. Do not over spend your limit/budget.spend your limit/budget.

Check your record against your statement.Check your record against your statement.

Selecting and Selecting and Using a Credit CardUsing a Credit Card

Shop for a credit card. Study all the details of Shop for a credit card. Study all the details of the application before signing. Note fees the application before signing. Note fees charged including annual fee.charged including annual fee.

Understand the details of the introductory Understand the details of the introductory offers and how long they last.offers and how long they last.

Know what constitutes a late payment and Know what constitutes a late payment and the amount of penalties charged.the amount of penalties charged.

Credit card bills are not considered paid until Credit card bills are not considered paid until the company receives and credits payment to the company receives and credits payment to your account.your account.

Jones’ Credit Card BillJones’ Credit Card Bill

What Stan and Alice expected . . .What Stan and Alice expected . . .Un-paid balance on prescriptionsUn-paid balance on prescriptions

$280.00$280.00Cash AdvanceCash Advance $ 50.00$ 50.00 Interest on balance dueInterest on balance due $ 0.00$ 0.00

(at introductory 0% APR) (at introductory 0% APR) November Balance DueNovember Balance Due $330.00$330.00

Jones’ Credit Card BillJones’ Credit Card Bill What Stan and Alice were billed!What Stan and Alice were billed!

Balance carried over from September Balance carried over from September $280.00$280.00

October late feeOctober late fee $ 19.00$ 19.00

Interest on un-paid balanceInterest on un-paid balance $ 3.98$ 3.98

Cash AdvanceCash Advance $ 50.00$ 50.00

Cash Advance fee (minimum $5.00)Cash Advance fee (minimum $5.00) $ 5.00$ 5.00

Cash Advance interestCash Advance interest $ 1.40$ 1.40

(15.99% based on 12 days)(15.99% based on 12 days)

November Balance Due $359.38November Balance Due $359.38

Tips for Seniors in DebtTips for Seniors in Debt

Studies show that older Americans have a Studies show that older Americans have a higher debt load than in the pasthigher debt load than in the past

This is due to rise in health care costs and This is due to rise in health care costs and decline in pensions and drop in retirement decline in pensions and drop in retirement incomeincome

Many senior citizens find themselves victim Many senior citizens find themselves victim to fraud, scams and identity theftto fraud, scams and identity theft

Tips for Seniors in DebtTips for Seniors in Debt

Do not be afraid to seek guidance. Talk to a Do not be afraid to seek guidance. Talk to a banker or financial advisor first. Family banker or financial advisor first. Family members can also be of help.members can also be of help.

Put aside any needless guilt or shame.Put aside any needless guilt or shame. If a spouse previously took care of finances, If a spouse previously took care of finances,

it does not relieve you of being responsible it does not relieve you of being responsible now.now.

Make a monthly budget and determine if you Make a monthly budget and determine if you can meet your obligations.can meet your obligations.

Tips for Seniors in DebtTips for Seniors in DebtPrioritize your bills. When income is limited Prioritize your bills. When income is limited

always pay your mortgage/housing first, car always pay your mortgage/housing first, car second, and don’t let your health insurance second, and don’t let your health insurance lapse.lapse.

Unsecured debt, such as credit cards can be Unsecured debt, such as credit cards can be negotiated.negotiated.

Know who your creditors are. The more that Know who your creditors are. The more that you know about whom you owe, the less likely you know about whom you owe, the less likely you will be to become a victim of scam.you will be to become a victim of scam.

Do not let collectors push you into a bad Do not let collectors push you into a bad decision.decision.

Tips for Seniors in DebtTips for Seniors in Debt

Consider a part-time job if possible to help Consider a part-time job if possible to help you catch up on bill payments.you catch up on bill payments.

Cut expenses to a minimum where possible, Cut expenses to a minimum where possible, but do not jeopardize your health.but do not jeopardize your health.

Ideally retire without a mortgage.Ideally retire without a mortgage.Move to a smaller housing option.Move to a smaller housing option.Do not open additional credit lines or use Do not open additional credit lines or use

“convenience checks” to pay off debt.“convenience checks” to pay off debt.

Tips for Seniors in DebtTips for Seniors in DebtDo not cash out home equity lightly—if Do not cash out home equity lightly—if

expenses are already tight, this could put expenses are already tight, this could put your home at risk.your home at risk.

Consider tapping your life insurance.Consider tapping your life insurance.

Last option includes bankruptcy and not Last option includes bankruptcy and not paying your bills. When you die, if you have paying your bills. When you die, if you have assets, your creditors will be paid from your assets, your creditors will be paid from your estate. If you jointly own assets with estate. If you jointly own assets with someone else, that asset may be taken to someone else, that asset may be taken to repay any debtsrepay any debts..

George Loses It?George Loses It?

What steps should George have taken in the What steps should George have taken in the first place to avoid having his identity first place to avoid having his identity “stolen”?“stolen”?

What special precautions should be taken What special precautions should be taken when using credit cards to protect one’s when using credit cards to protect one’s identity?identity?

What should George have done when he first What should George have done when he first noticed his credit cards were missing?noticed his credit cards were missing?

Tips for Protecting Your IdentityTips for Protecting Your Identity Try to maintain the greatest possible level of Try to maintain the greatest possible level of

security over your private information.security over your private information.Do not give out financial information on the phone Do not give out financial information on the phone

unless you made the call and know the person or unless you made the call and know the person or organization being called.organization being called.

Store in a secured place, copies of all identity and Store in a secured place, copies of all identity and fronts and backs of credit cards carried with you. fronts and backs of credit cards carried with you.

Report missing items immediately.Report missing items immediately.Call the Police—Identity Theft Call the Police—Identity Theft

is a Crime.is a Crime.

Tips for Protecting Your IdentityTips for Protecting Your IdentityShred or tear all mailed credit or other Shred or tear all mailed credit or other

solicitations, bank records or any other solicitations, bank records or any other discarded documents that may provide discarded documents that may provide personal information.personal information.

Know due dates for bills. If you do not receive Know due dates for bills. If you do not receive them on time, contact the company.them on time, contact the company.

To limit number of pre-approved credit card To limit number of pre-approved credit card offers call 1-888-567-8688.offers call 1-888-567-8688.

See Participant Manual for additional ways to See Participant Manual for additional ways to limit offers that you receive.limit offers that you receive.

Tips for Protecting Your IdentityTips for Protecting Your Identity

Periodically request a copy of your credit Periodically request a copy of your credit report.report.

Do not put your Social Security number on Do not put your Social Security number on your driver’s license or print on your checks. your driver’s license or print on your checks.

Do not carry your Social Security Card in your Do not carry your Social Security Card in your billfold.billfold.

Store new and cancelled checks in a safe Store new and cancelled checks in a safe place. Report lost/stolen checks to your bank place. Report lost/stolen checks to your bank immediately, and carefully review every immediately, and carefully review every statement.statement.

Guard Against Guard Against the Gambling Trapthe Gambling Trap

Older citizens are targeted by Older citizens are targeted by the gaming industry as they the gaming industry as they have time available and have time available and accumulated wealthaccumulated wealth

Casinos offer a safe Casinos offer a safe environment, low-cost food, environment, low-cost food, social activity, entertainment social activity, entertainment and in some cases and in some cases transportation.transportation.

Guard Against Guard Against the Gambling Trapthe Gambling Trap

To protect yourself from To protect yourself from the risk of becoming a the risk of becoming a compulsive gambler, set compulsive gambler, set personal guidelines that personal guidelines that will help you keep will help you keep gambling activity truly a gambling activity truly a form of entertainment.form of entertainment.

Guard Against Guard Against the Gambling Trapthe Gambling Trap

No one should feel pressured No one should feel pressured to gamble.to gamble.

Set limits to play– both time Set limits to play– both time limit and a limit to the amount limit and a limit to the amount that you are willing to lose.that you are willing to lose.

Be aware that you will lose Be aware that you will lose more often than you will win.more often than you will win.

Money spent gambling should Money spent gambling should be considered a cost of be considered a cost of entertainment.entertainment.

Guard Against Guard Against the Gambling Trapthe Gambling Trap

Money to provide for basic needs, such as Money to provide for basic needs, such as food, clothing, medication, and shelter food, clothing, medication, and shelter should not be used for gambling.should not be used for gambling.

Do not rely on gambling to cover the cost of Do not rely on gambling to cover the cost of basic needs.basic needs.

Borrowing money from any source, including Borrowing money from any source, including credit card cash advances, pawning personal credit card cash advances, pawning personal belongings or writing bad checks is risky belongings or writing bad checks is risky behavior.behavior.

Guard Against Guard Against the Gambling Trapthe Gambling Trap

Do not gamble when you are feeling lonely, Do not gamble when you are feeling lonely, depressed or angry, or when you are under a depressed or angry, or when you are under a great deal of stress.great deal of stress.

Bright lights, crowds of people and Bright lights, crowds of people and excitement of the casino can have a hypnotic excitement of the casino can have a hypnotic effect.effect.

Drinking alcohol or using drugs while Drinking alcohol or using drugs while gambling is risky because it can interfere gambling is risky because it can interfere with your ability to control gambling and stick with your ability to control gambling and stick to your limits. to your limits.

Lou “Maxes Out”Lou “Maxes Out”CREDIT REALITY CHECK

Year 1 15 25 30 45 47

Payment Number

1 180 300 360 540 566

Years of Payment

0 15 25 30 45 47

Minimum Payment Due

$50.00 $26.69 $17.53 $14.21 $10.00 $10.00

Interest Paid $41.25 $22.02 $14.46 $11.72 $3.52 $.09

Principal Paid

$8.75 $4.67 $3.07 $2.49 $6.48 $9.91

Balance Due $2,491.25 $1,330.01 $873.23 $707.57 $207.03 $0.00

Total Interest Paid to Date

$41.25 $5,515.67 $7,669.04 $8,450.03 $9,545.26 $9,983.63

Total Principal Paid to Date

$8,75 $1,169.99 $1,626.77 $1,792.43 $2,292.97 $2,500.00

TOTAL PAID $12,483.63

Credit Cards: Friend or Foe?Credit Cards: Friend or Foe?

53.8% of senior households carry some debt53.8% of senior households carry some debtHalf of those households are $20,000 in debt.Half of those households are $20,000 in debt.Practice what you have learned today on Practice what you have learned today on

managing your financial affairs, credit card managing your financial affairs, credit card and protecting your identity.and protecting your identity.

Do not become one of the statistics!Do not become one of the statistics!

ReferencesReferences ““American Seniors Rack Up Debt Like Never Before”, Seniors USA, (American Seniors Rack Up Debt Like Never Before”, Seniors USA, (http://senrs.com/american_seniors_rack_up_like_never_before.htmlhttp://senrs.com/american_seniors_rack_up_like_never_before.html ).).

Cantrell, Randy, Citing of the “2000 Census Figures” August , 2004Cantrell, Randy, Citing of the “2000 Census Figures” August , 2004

““Credit Prevention - Some Steps You can Take”, Legal Counsel for the Elderly, (Credit Prevention - Some Steps You can Take”, Legal Counsel for the Elderly, (http://http://www.uaelderlaw.org/id/C.htmlwww.uaelderlaw.org/id/C.html).).

““Greatest Generation in Debt”,Greatest Generation in Debt”, (http//www.cbsnews.com/stories/2003/12/10/earlyshow/living/money/(http//www.cbsnews.com/stories/2003/12/10/earlyshow/living/money/

main587903.shtml)main587903.shtml)

Schroeder, Debra and Rebecca Versch, “Protect Your Credit and Identity”, Schroeder, Debra and Rebecca Versch, “Protect Your Credit and Identity”, NebFacts, University of Nebraska Cooperative Extension, NF02-538NebFacts, University of Nebraska Cooperative Extension, NF02-538

““Tips for Seniors in Debt”, Consumer Credit Counseling Service, Tips for Seniors in Debt”, Consumer Credit Counseling Service, (http://www.cccsatl.org/index.asp?_method=view&sc+125&cn+1734).(http://www.cccsatl.org/index.asp?_method=view&sc+125&cn+1734).