Credit Card Budget

8/8/2019 Credit Card Budget

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Debt Management


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Budgeting 101

The first step is to knowhow much money iscoming in so you knowhow much money youcanspend.


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Budgeting Basics:

Determine wants vs needs

Determine your short term and long term goals

Do the math

Are you tough enough to make the decisions thatwill get you where you want to be?


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Credit andCommercialism

Makes you feel inadequate

Answer is spend money whenever youneed to resolve a problem or meet a need

The have it now, pay later lifestyle isprevalent


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ATM Fees Computerware Home Parties Cosmetics

Online Services Beauty Parlor Over the limit fees

Beepers Dating Ice Cream Parking Fees CDs

Gifts Overage Fees Bottled Water BouncedChecks Clubs

Cigarettes Greeting Cards Tanning Haircuts Videos

Cable TV Late Payment Fees Dinners Out Bar Night

Books Fast Food Attacks Dry Cleaning Car Wash

Lottery Tickets Magazines Movie Rentals Sports

Lunches Out Film Development Gambling Prescriptions

Household Items Pet Costs Licenses Speeding Tickets

Cash Advance Fees Munchies Vending Machines Souvenirs


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What isCredit?

It is a loan, allowing you to receive goods andservices now and pay for them later

It is an agreement that the money borrowed willbe paid back

It is a debt, it is NOTincome

Itcomes with fees; interest and other charges


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Build your Credit Record

Often called your second resume.

Information stays on your credit report forseven years.

Your credit rating is your reputation. Employers,insurers, creditors, and leasing agents check yourcredit rating. Itcan affect job prospects, ability toobtain loans at lower interest rates, ability to buy a

house or other large items, and ability to rent anapartment.

Your credit record is used for determining

insuran

ce premi

ums, et

c.


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What is my FICO score?

Like your GPA the higher yo

ur FI

CO s

core the better

FICO scores range from 300-850

If your score is 680, Congratulations! Youre a primeborrower

If your score is below 680 youll be stuck with sub-primerates and will pay more for your loan

If your score is below 550, just forget it

A good FICO score of 750+ can mean your interest rate ona home loan will be 4 percentage points lower thansomebody with a 500 score. This can mean over $200,000in saved interest on a house.


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Getting a good

score

The longer you have a particular creditcard thebetter (it takes time to develop a credit history)

Pay your bills on timeKeep your account balances below 50% of youravailable credit

Be careful aboutco-signingAvoid excessive inquiries


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Use of Family Resources

Keep communication lines open

Treat your family with more respect than creditorsbecause they may be the last source of security,financial and moral support


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Fees, fees, and more feesInterest rate fees--what you pay for using the $$usually 17% - 21% for students (after intro rate)

Annual fee for just having the creditcardOver the limit fees, charged whenever you exceedyour credit limit

Late payment fees

Transaction fees

Other miscellaneous fees

read the fine print!!!

CreditCards: The Basics


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Plastic Money: The Basics

DebitCards

allow access to checking account via ATMs and pointof sale (POS) terminals

amount is deducted from checking account

not a charge card, must have the funds available

SmartCardsthese cards store personal information

may be loaded with a certain dollar value thatcan

then be spent at POS terminals


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Plastic Money: The Basics

Charge Cards

must be paid in full every month (AMEX)

provides

convenien

ce of not having to pay forpurchases with cash, but balance may not be

carried over month-to-month

CreditCards

operate on a credit limit and revolving basis

if not paid-in-full within grace period, interest ischarged on the remaining balance


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CreditCards:

Some disadvantages are:

college students are more likely than other types

ofcreditcardusers to run up debts they cannot pay

college students (with limited or no credit historyand income) are charged higher interest rates


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Table 1: Minimum Repayment Schedule on a $2,000CreditCard Loan at 19 PercentMonthly minimumpayment amount

Number of monthsto repay

Total interestpayment

$40 100 $1,994

$50 64 $1,193

$75 35 $619

$100 25 $424

Source: CreditCard Minimum Payment InterestCalculator, Daniel C. Peterson,

www.webwinder.com

Interest savings between lowest/highest payment = $1,570;

time saved = 75 months or 6.25 years!


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CreditCards:

Characteristics of high-risk use

Average creditcard balances over $1,000

Owning four or more creditcardsCarrying a balance each month

Using creditcards to charge tuition or fees


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CreditCard Donts

Dont get more than one

Dontuse them for cash advances

Dontuse them to pay for basics: rent, groceries, etc.

Dontcharge more than youcan pay off in a month

Dont let banks increase yo

ucredit limit


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CreditCard Dos

Use a debitcard vs a creditcard

Use a card with no annual fee and low interest rates

Know all of your cards hidden fees

Always pay more than the minimum each month

Pay on time, all the time


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Good Vs Bad Debt

Gooddebt is debt that returns something of longterm value such as a higher education or home.

Baddebt is often categorized as short-term feelgood debt and may be unwise purchases that youcant afford anddont really need. Any baddebtover 15% of your annual income after taxesshould set off an alarm.


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Solutions

Redefine the good life your own way.

You have worked and studied hard to get intocollege and youdeserve to be in control withfinancial peace of mind rather than buy with credit

every pleasure, a

ctivity, or material thing

desire

d,for now, anyway.

Resist the pressure from your family, friends, andassociates to live a life style that is beyond what

youcan currently afford.

List your short-term financial obligations andgoals for each month, for the year, and future 5

years.


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Solutions

Focus on paying on the balance with the highestinterest rate.

Develop a budget

Live within your means Transfer creditcarddebt to a low interestcard or a

lower interest personal loan

Lose the creditcards

Use your savings

Sell stuff youdont need

Consolidate your student loans


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AvoidBankruptcy

Itdoes notdischarge student loans, child support,secureddebt, or income taxes

Goes on your record for 10 years

May hurt parents credit rating ifco-signed

Can keep you from getting a mortgage for ahouse, credit at reasonable rates, a job, orfrom being promoted


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Debt Warning Signs

Living from paycheck to paycheck

Making late, minimum, or skipping payments

Having creditcards at or near your credit limit

Arguing with family or friends over your spending habits

Being unsure of how much you really owe

Using cash advances to pay your bills

Having your creditcarddeclined

Having increasingly more of your income paying fordebts each month


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Youcan run..


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Stud

entCreditCard

DebtIf you have a problem get help!

Consumer CreditCounseling Services(CCCS)

call 800.388.2227

to be connected to the office nearest you


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Web Resources

National Foundation for Credit Counseling-http://www.nfcc.org/

NFCC Debt Advice- http://www.debt advice.org/

Practical Money Skills for Students-http://www.practicalmoneyskills.com

Mapping Your Future- http://www.mapping-your-future.org/features/dmbudget.html

Bankrate- http://www.bankrate.com

College Is Possible- http://collegeispossible.org


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The following individuals and organizations

contributed to this presentationU.S. Department ofCommerce, Bureau of the Census

Mapping Your Future

USA Funds Services

Dr. Flora Williams, Purdue University

Michele Colson, Debt ManagementConsultant

Jim Swisk, Michigan Guarantee Agency

Young Money

The Mint

Credit Card Budget

Documents

Transcript of Credit Card Budget