financial literacy education iii: credit and credit cards fall 2010 online version for program...
TRANSCRIPT
Financial Literacy Education III:
Credit and Credit Cards
Fall 2010
Online Version for Program Course Credit
2010-11
Page 2
Goals for This Meeting
Budgeting
Credit Basics
Credit Scores
Credit Reports
Credit Cards
Credit Problems
Page 3
Group Agreements
Commitment to Glow Foundation’s program
Be prompt and prepared for all Glow sessions
(including HW items)
Reach out for help when needed
Respond promptly to emails or phone calls
Share the information learned with family and peers
Be respectful (one mic)/confidentiality
Accountable for myself and the group success
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Credit Terminology __ Annual Fee a) A company that gathers information on
consumers who use credit.
__ Annual Percentage b) A document issued by an independent credit Rate (APR) agency that contains information concerning a loan applicant’s credit history and current credit standing.
__ Credit Bureau c) An amount a credit card company charges a credit card holder to use the card for a
year. __ Credit Report d) A rating system that indicates a person’s
creditworthiness based on a number of criteria. __ Credit Score e) The total amount of money borrowed not including interest or service charges.
__ Principal f) A rate used to compare different loans which takes into account the loan’s
interest rate, term, and fees.
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Credit Defined
FIRST, let’s come up with a group definition for credit:
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Credit
How can you start to build good credit?
Good Credit Signs
Paying at least the minimum balance
Paying on time
Making all payments
Staying within your credit limit
Bad Credit Signs
Paying less than the minimum balance
Paying late
Missing payments
Exceeding your credit limit
What are signs of bad credit?
Establishing credit is important for borrowing money later. No credit is not the same as good credit!
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How Credit Impacts You
Establishing good credit history is important! Credit can affect various aspects of your life:
Lenders: Determine whether you can get a loan and the loan terms (good credit = better interest rate)
Insurance Companies: Determine if you can get insurance and the rates you pay
Employers: Can affect you ability to get a job
Landlords: Determines whether you can rent an apartment
Telephone and other utility companies can use this to determine whether to provide services to you.
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Credit Score
Credit Score: A number between 300-900 that indicates your creditworthiness.
• The higher the number, the stronger your
score.
• Points are earned based on factors like your payment history, the length of your credit history, and account balances.
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Credit ReportWhat is a credit report?
A document issued by an independent credit agency that contains information concerning a loan applicant’s credit history and current credit standing.
Review your credit report:1.Annually2.Before making a big purchase
People/Companies Review Your Credit Report When You:1.Complete a credit card application2.Complete a rental application3.Apply for a loan
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Credit Cards vs. Debit Cards
Credit cards allow you to purchase something TODAY and pay it off over time.
Credit cards are NOT the same as debit cards
Credit Cards Debit Cards
Payment Pay Later Pay NOW
Interest Charges
Interest is charged on the remaining balance
No
Pros Potential to build your credit history and get freebies/points
Prevent major debt
Cons Additional fees; risk of overspending and hurting your
credit history
Fees if you overdraw
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Before Getting a Credit Card…
SHOP AROUND!! Know:
1. Are there annual fees or other regular charges?
2. What is the credit limit?
3. What is the interest rate? Is it fixed or variable?
4. What is the Annual Percentage Rate or APR (Measurement that takes into account the interest rate, term, and fees)
5. Are there benefits to getting this card (points, freebies, etc)?
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Paying Your Credit Card
Original Balance
APR Monthly Payments
Number of
Monthly Payments
Term (Years)
Total Amount
Paid
$1000 18% Minimum 87 7 $1,516
$1000 18% Minimum + $25
26 2 $1,187
$1000 18% Minimum + $50
16 1 $1,119
TAKEAWAY: Pay as much of the balance as possible to reduce the term and amount of interest paid.
Whenever possible, pay off your bill in full!
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Tips for Managing Your Credit Card
1. Use cash or debit cards for daily expenses2. Know how you are going to pay for your credit card
purchases before you start spending3. Get a card with low interest and pay as much of the
balance as possible4. Pay on time5. Don’t spend more than you have. Stay within your
budget.6. Don’t exceed your credit limit7. Others?
Page 14
Recap
Budgeting
Credit Basics
Credit Scores
Credit Reports
Credit Cards
Credit Problems