Credit Card Numbers in the US American Express: 38 million Visa: 109 million cards Discover: 49...
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Transcript of Credit Card Numbers in the US American Express: 38 million Visa: 109 million cards Discover: 49...
Credit Card Numbers in the US
• American Express: 38 million• Visa: 109 million cards• Discover: 49 million• MasterCard: 82 million
• Total US credit Debt in 2014: $700 BILLION
The True Cost of Paying the Minimum Payment
Payment Schedule: If you start with a debt of 580.00 and make the minimum payment each month it will take you 8 years and 1 month to be rid of your debt. In that time, you will pay $470.32 in interest.
Month
Minimum Payment
Interest Paid
Principal Paid
Remaining Balance
1 $14.25 $8.55 $5.70 $564.30
2 $14.11 $8.46 $5.64 $558.66
3 $13.97 $8.38 $5.59 $553.07
4 $13.83 $8.30 $5.53 $547.54
5 $13.69 $8.21 $5.48 $542.06
6 $13.55 $8.13 $5.42 $536.64
The Credit Card Industry
• $40 billion in profits in 2010– $12 billion in fees
• Most credit card companies are more profitable than places like McDonalds and Microsoft
Market Control
• 5 companies control 65% of the market:– American Express– Bank of America– Citigroup– JP Morgan Chase– MBNA– VISA
Affinity Cards• A credit card offered by
two groups, one a financial institution and the other a non-financial institution, such as a
• College• Airline• Non-profit group• Tim Hortans• West Jet
What’s Next? Life After High School
60%
40%Work force
School: 2-year, 4-year,
or vocational school
Why Students Use Credit Cards
• An increase in college costs and a decrease in families’ liquid savings leads to a dependence on loans & credit cards.
• Students have a cognitive disconnect between the:– Reality of their current incomes vs. an affordable lifestyle
More Reasons Why Students Use Credit Cards
• Students want their parents’ lifestyle BUT don’t have the same financial resources. They depend on:– Financial Aid– Families– Part-time work– Credit Cards
Consumption and Credit
• Students don’t embrace “old school” financial values
• Consumption pressure and easy access to credit
• Increased social acceptance of debt
• Credit is a reward
Long-term Effects of Credit
• Graduate with:– Student loans– Credit card debt
• Affect credit score• Harder to get:
– Car loan or insurance– Apartment lease– Mortgage loan– Job
College Students’ Money Problems
Credit Card Use by Year
Credit Cards: The “Other” Drug
• Marketing of credit cards on campuses poses a greater threat to students future than almost anything else
• Students with high credit card debt are more likely to:– Earn poorer grades– Drop out of school– Suffer from depression– File for bankruptcy– Work more hours to pay bills •No job?
•No income? •No problem?
•If you are a student, you will be approved!
Preparing for Managing Credit on Your Own
• Work income• Allowance income
– Live on a budget at home
• Food• Entertainment • Clothing
Managing Credit in College
• Get one credit card– Authorized user on
parents’ card– Ask parent to cosign card– Secured Card
• Pay off the balance every month
• Don’t take cash advances• Pay on time
Why Credit is Important
• FICO or credit score:• Credit Card Issuers &
Lenders• Auto Insurers
– Determine Premium (Monthly payments)
• Employers– Are you a worthy hire?
• Landlords– Are you a reliable tenant?
35% Payment History
• Late payments have the greatest negative impact.
• Recency & frequency are important too.
30% Outstanding Balances
• Total balance vs. total available credit.
• Are you overextended?
15% Length of Credit History
• Number of years you’ve used credit.
• How long since you’ve used certain accounts.
10% New Credit
• Number of new accounts.
• Multiple requests reduce your score.
10% Types of Credit
• Mix of:
– Revolving Credit• Credit cards
– Installment Credit• Car loan• Home loan
How to Improve Your Score
• Pay all bills on time.
• Pay any delinquent bills.
• Lower your total credit card debt.