CARE
Credit Abuse Resistance
Education Program
provided by the United States
Bankruptcy Court for the
District of Colorado
Why CARE?
Teens surveyed reported
spending 98% of their money,
rather than saving it
It’s a marathon!
Your future, your financial well-being…
it's not a sprint,
it's a marathon
If you are training to be a long distance
runner, what would you do?
First few days you would probably just jog.
Or maybe even walk fast. You start with a
few blocks, and then half a mile, a mile,
then a couple of miles. And before you
know it, several months have passed and
you go from being out-of-shape to being
someone who could run a marathon.
Smart Runners v. Smart Investors
Smart runners don't go out and try to sprint
26 miles the very first day. They build it up.
Same thing with your savings. You don't
start from saving nothing to try to save
$2000 or $3000 a month. But you can start
small. With perseverance, you will finish
big!
Who thinks they can save $10 a day?
(That equals $3650 a year.)
How much would you have in the future?
(Interest-bearing account at 6% per year)
At 20 years = $153,319.28.
At 30 years = $329,043.34.
The “latte” factor
How much are you squandering every day?
How many people go to Starbucks every
day? If you go four times a week and at each
visit you order a venti frappacino. That's
$4.05 each visit. Let us just assume it's four
dollars to make the math easier.
How must is that venti frap costing you?
$4 x 4 times a week = $16 a week
$16 x 4.33 weeks = $69 a month
$69 x 12 months = $828 a year
But what is the REAL cost?
If you would put just your Starbucks money
into an interest-bearing account, after 20
years, you would have $32,040.32.
That’s some pretty expensive coffee and ice.
68% of teens report never
discussing responsible credit
card use with any family
member
Graduating college students
average $20,402 of debt with
$3,262 on credit cards
84% percent of undergraduates
indicated they needed more
education on financial
management topics. In fact,
64% would have liked to
receive information in high
school and 40% as college
freshmen.
What is credit?
Credit is the ability to borrow
money
 Borrowing money creates debt
 Debt is what you owe
 It costs to borrow money

Types of Credit
1. Long Term Credit - payments made over several
months or years

Mortgages

Car Loans

Student Loans
2. Short Term Credit – single payments



Utility Bills
Cable/Satellite
Cellular phone bills
How would I start
using credit?
Use a checking account or debit card
 Pay all bills on time
 paying for your own cell phone
might be a great place to start!
 Take out a small loan from a bank
and repay it timely

Debit cards are different
from Credit cards
A debit card works just like a check
 The money for the purchase comes directly from
your bank account
 You must have money in the bank account to use
the card
 can’t spend what you don’t have
 Many places prefer debit cards over checks or do
not accept checks at all

What is Interest?

Interest is the amount that a lender charges
to borrow money

The higher the interest rate, the more
money you pay

Interest rates vary from credit card
company to credit card company
Credit Card
Costs and Fees
Finance Charges
Balance Transfer
Fees
Cash Advance Fees
Universal Default
Rate
Annual Fees
Over-the-Limit Fees
Document and
Research Fees
Reissued Card Fees
Returned Check
Fees
Go to
www.cardratings.com
to find deals
What is a Credit Report?
A credit report is a history of how
well you have paid your bills
 Also collects other financial
information about you
 Filing for bankruptcy will remain
on your credit report for 10 years

Factors That
Negatively Affect
Your Credit
1.
History of late/past due payments
2.
Failure to make payments
3.
Having too much credit
4.
Having no credit
5.
Not leaving a forwarding address
6.
Judgments against you/Bankruptcy
Some Good Reasons to have
Credit Cards

Emergencies

Large Purchases

Internet Purchases

Establish a Credit History

Identification

Safety
Some Downsides
to Credit cards

It is very easy to lose track of your
purchases


You end up spending more than you think
The convenience of a credit card can
be overpowering

leads to unnecessary and even foolish
purchases.
Credit Card
Control
Reasons to reduce or eliminate the credit card
habit:
1.
Improve your credit rating
2.
Save more money and pay less interest
3.
Regain control over your life when you
control your spending
Saving for the
Future

Learning to live within your means
will help you get ahead (wants vs.
needs)

Budgeting creates financial security

Budgeting will keep you out of debt
SO, how do
you budget??
Keep track of what you make.
 Keep track of what you spend.
 Ask yourself, how close are they?

To make your budget work,
you must equalize what you
spend with what you make by:
1)
2)
Making more
Spending less
(Sounds easy, huh?)
Start making adjustments…

Earn more by working more hours

Reduce expenses by buying your
coffee at 7/11 instead of Starbucks

Be honest with yourself: Do I really
need this or do I simply want this?
Then, stick to your budget!
Sticking with a budget is a lifelong
process
 Be flexible


your budget will change as your life
changes
Let’s give you an
example
{ What if you bought…

Laptop = $1,300.00

Scanner/printer/fax for $400

Software/wireless router for $300

TOTAL: $2,000

you used your credit card

you make monthly payments of $300

you never miss a payment

annual percentage rate on your card is
8%
What will the system end
up costing you?
{
(remember, it costs to borrow
money)
How long will it take to pay for
it?
Your total cost will be $2052
It will take you SEVEN
MONTHS to pay for it

Now, instead of an 8% rate, assume
that, because your credit rating is
poor, you must pay interest at a rate
of 24%.

Also assume that you pay the
MINIMUM MONTHLY PAYMENT
of only $50 per month.

It will take you
82 MONTHS
(almost SEVEN
YEARS) to pay
for it

Total payment:
$4,085!
There is a growing crisis in this
country with credit card abuse

Many banks and credit cards are
actively seeking younger customers

Understanding how credit works and
what kinds of things to avoid when
using credit cards is essential before
the damage is done
True or False
You pay no interest on a debit card
purchase.
TRUE!
A debit card
works just like
a check.
True or False
There is a credit report for everyone
over age 18.
FALSE
There is a credit
report only for
people who have
established a credit
history.
Having no credit
history can have
adverse
consequences.
True or False
If you are late in making a
few payments on your
credit card, the interest rate
you pay may increase
sharply.
TRUE
For example, on one
Platinum VISA card,
the interest rate
jumps from 4.9% to
30% if you pay late
or miss even one
payment. Late
charges also accrue.
True or False
If you miss just one or two
payments on your credit card, it
won’t hurt your credit rating.
FALSE
That negative
information
can legally
remain on
your report for
up to 7 years.
True or False
No one really looks at credit
reports.
FALSE
People who lend you money will almost
always review your credit report. Car,
home, credit cards.
More prospective employers also look at
credit reports.
You can receive free copies of your credit
report each year—worth reviewing!
How many of you plan to go to college?
How will you pay for it?
Assistance from family
Student loans
Personal savings
Student Loans
The majority of college students today
have to take out students loans to help
pay for their college education
Source:
Time
Magazine
What is the value of a college education?
Gain skills and knowledge for a career?
Gain a well-rounded education?
Increase earning power?
Become an informed citizen?
Learn to think critically?
Formulate goals and values?
What is cost of college?
The average debt load for college seniors
who took out loans and graduated in
2010 was…
$25,250
Is that too high?
Is that reasonable?
College is still a smart move!
Source:
Time
Magazine