C.A.R.E.

Credit Abuse Resistance Education Program

C.A.R.E.A Program of:

U.S. Bankruptcy Courts of West Virginia

The West Virginia State Bar

The WV Bankruptcy Law Committee

C.A.R.E.

The C.A.R.E. program was founded by the Honorable John C. Ninfo, II, Bankruptcy Judge for the Western District of New York.

As of March 2007, the C.A.R.E. program is in 39 states and the District of Columbia.

C.A.R.E.

A Word from Judge Ninfo

“It is the hope of the program that students will not go down the road of consumer credit abuse once they understand:

(1) the true cost of consumer credit;

(2) how difficult it is to repay consumer debt incurred to buy and do things that you really can’t afford and don’t need;

A Word from Judge Ninfo

(3) the many consequences of financial problems, which are becoming more numerous and serious;

(4) the need to have savings and how to effectively budget with a view towards needs versus wants;

A Word from Judge Ninfo

(5) that just maintaining debt is not being able to afford it, affording debt is being able to pay it back; and

(6) it is better to live consumer debt free.”

The Need for Credit Education

68% of teens report that they have not had a meaningful discussion about responsible credit card use with their parents.31% of teens, 18-19 years of age, have credit cards in their own name.71% of young adult cardholders revolve their balances compared to 55% of all cardholders.

The Need for Credit Education

People under the age of 25 are one of the fastest growing groups of bankruptcy filers.One out of five young adult households are in debt hardship – meaning that over 40% of their income goes to debt payments each month.In the last decade, young adults (ages 18-24) saw credit card debt increase 104%.

The Need for Credit Education

Graduating college students average $20,402 of debt - $3,262 of that is credit card debt.

The Need for Credit Education

18% is the current average starting interest rate for students and young adults.

The Cost of Credit Card Debt

Paying Interest – Less Savings

43% of Americans spend more than they make, and in 2005, for the first time since the Great Depression, our savings rate in this country was negative.

The Cost of Credit Card Debt

An American consumer with $10,000 in credit card debt, paying an average interest rate of 14% will pay $117 per month in interest alone.

If they could invest that same amount each month of their work life (approximately 40 years), it would grow to $307,103 (assuming a 7% return).

Making the Minimum Payment

Paying the minimum monthly payment on $2,000 with a 31% interest rate will take 15.6 years to pay off the debt at a total cost of $5,348.15, including $3,348.15 in interest.

The Cost of Credit Card Debt

Minimum Payment vs. Fixed Payment

($2,000 at 18% Interest)Minimum Monthly Payment

Fixed Monthly Payment of $80

Years to Pay Off 9.5 2.6

Total Interest Paid $1,115.69 $477.99

Total Purchase Cost $3,115.69 $2,477.99

Cash vs. CreditStore A Store B Store C

Cash Price $379 $388 $410

APR 27% 13%

Number of Monthly Payments

12 12

Monthly Payment

$36.25 $35.00

Finance Charge $56.00 $32.00

Amount repaid $435 $420 $410

The Importance of Good Credit

The Importance of Good Credit

Your history of payments, employment, and salary makes you a good candidate for a loan.

Better Loan TermsLender 1

Credit Union

Lender 2

Dealership

Lender 3

Bank

Amount of Loan $5,000 $5,000 $5,000

Monthly Payment

$226.14 $161.34 $131.67

Number of Payments

24 36 48

Total Repaid $5,427.27 $5,808.09 $6,320.12

Finance Charge $427.27 $808.09 $1,320.12

APR 8.0% 10% 12%

The Importance of Good CreditYou will be viewed as financially trustworthy and given better loan terms.

It may help you rent an apartment and obtain employment – most landlords and prospective employers will look at your credit report.

Consequences of Credit Abuse

Credit abuse may make it impossible to complete a degree.

Denial of employment, credit, student loans, or leases. Higher interest rates and higher insurance rates.

Bad credit rating.

Emotional stress, divorce, and family problems.

Bankruptcy.

Avoiding Credit Abuse

Distinguish between wants and needs.

Have only one credit card. Opt for a low credit limit on that one card.

Pay off your balance each month.

Never make only the minimum payment.

Bringing C.A.R.E. to Your Classroom

Please visit the C.A.R.E. website at www.careprogram.us