Money Matters
Kentucky Wesleyan College
KW1101 – Fall 2006
Facts
 There were nearly 1,500,000 personal
bankruptcies in the US in 2001--95% of these
were declared “no-asset” cases.
 Keep in mind that new bankruptcy laws (effective
in October 2005) now make it harder to file for
bankruptcy.
 So, you’ll have to pay for what you charge
….even if that means you’re still paying for pizza
you ate in college when you’re in your 30’s.
Student
Credit Card Debt
 The average undergraduate has $2,200 in credit card
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debt (Nellie Mae-2004).
The average graduate student has $5,800 in credit card
debt.
If you fall behind on your payments, you get slammed
with HIGH late fees.
High credit card debt also affects your ability to make
your student loan payments.
It may also affect your ability to buy a car and/or a
home when you graduate.
Student
Credit Card Debt
 One consequence of high credit card debt is an
increase in student dropouts so the student can
work more to meet the minimum payment
requirements (State of Iowa, 2000).
 Students with high debt levels also tend to have
higher anxiety levels than other students which
may lead to multiple personal problems.
What can you do to avoid some of
these financial worries?
Facts
 Seventy percent (70%) of Americans live from
paycheck to paycheck with no savings!
 According to the Department of Commerce, the
personal savings rate in 2000 was (2.2%), the
lowest rate in 60 years.
 According to the Ladies Home Journal- the
average household receives 43 credit card offers
per year.
 USA Today reported that Citibank spent $10
million marketing credit cards to high school and
college students in 2002.
Cash or Credit?
 According to a Dunn and Bradstreet study,
people using cash tend to spend 12%-18%
less than those using credit.
 Decide if this is a need or a want?
 Calculate what buying on credit is really
costing you.
 Will this purchase make me happy today?
Tomorrow?
Cash or Credit?
 Are there additional expenses related to the
initial purchase?
 Avoid impulse purchases - Stress and/or a
hectic schedule tend to push us towards
impulse purchases.
 Do NOT charge more than you can pay off
in full each month!
Credit Card Myths
 I need a credit card to help “build my credit.”
 I can’t rent a car or book a hotel room without
a credit card.
 I will only use the card for emergencies- and
then pay it off every month to avoid finance
charges.
Credit Cards Facts
 Revolving credit does not necessarily
improve your credit and can negatively affect
your credit score.
 A debit card will allow you to rent a car, book
a hotel room and make phone or internet
purchases.
 78% of Americans do not pay their credit
card balances in full each month.
Credit Cards are NOT
“Free Money”
They are really high interest loans and may impose the
following types of fees on you!
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Finance Charge: an interest charge (as high as 20+%) on
the unpaid portion or the average monthly balance on your
bill each month
Annual Fee: a yearly fee charged by some companies
varying from $20-100.
Cash Advance Fee: avoid cash advances because fees are
steep and the company usually charges a higher interest rate
than the normal finance interest rate
Late Payment Fee: a flat fee around $35; may also result in
your finance interest rate increasing
Credit Cards – The Math
 A Sears charge has a 21.4%
interest rate and minimum payment
of 2.22% per month.
 So, let us put $1000 on a Sears
charge and make the minimum
payment. How long will it take to
pay this off?
Credit Cards – The Math
 According to bankrate.com’s
calculator, it will take 192 months
(16 years) and will cost $1694 in
finance charges.
 So…do you really need that item
right now?
Consequences of Late/No
Payments
 The credit card company reports both
positive & negative information to three
credit reporting agencies (Equifax,
Experian & TransUnion)
 Information reported includes:
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Original balance
Payment history
- Current balance
- Collections/legal
Consequences of Late/No
Payments
Many employers run a credit check on potential new
employees because research shows that people
with bad credit are more likely to steal from their
employers
So, negative information on your credit report may
keep you from your “dream job” when you graduate
Also, You may not be approved for a loan for a new
car and/or house because of a bad credit report
Closing Remarks
 Before getting/using a credit card, know that you
have to eventually pay for any items you charge.
 If you only make minimum payments, you may pay
more than twice the original cost of the item.
 Failing to make timely minimum payments will hurt
your credit rating and may prevent you from getting
your “dream job” when you graduate.
 If you incur high credit card balances, it increases
the likelihood that you will not finish college which
will make paying off those balances even harder.
References
 Barry Myers, Republic Bank
 www.nelliemae.com
 www.bankrate.com
 www.state.ia.us/government/ag/consumer/advisorie
s/student_creditcard.html