Transcript Personal Finance Education Overcoming Financial Hurdles

Personal Finance Education
Overcoming Financial Hurdles
Sponsored by:
ACA International –
The Association of Credit &
Collection Professionals
Material Provided by: The American
Bankers Association, CBM Credit
Education Foundation, Efunds, Experian,
Federal Trade Commission, Minnesota
Bankers Association, U.S. Dept of Labor,
and the Illinois Student Assistance
Commission
1
Why Do We Need Personal
Finance Education?
• Nellie Mae reports that the percentage
of students with credit cards rose from
67% in 1998 to 78% in 2001.
• The average college student carries a
credit card debt of $2,748 (Nellie
Mae)
• According to the National Foundation
for Credit Counseling, the number of
Americans entering debt management
programs has risen sharply over the
last ten years.
2
Five Things Everyone
Should Know
1. How to Balance a Checkbook
2. How to Read a Credit Report
3. The Difference Between a Credit
Card and a Debit Card
4. Ways to Save Money
5. How to Create a Monthly Budget
B
3
Are You Spending Money Wisely?
When you go grocery shopping do you?
a) Create a list and stick to the items on that list?
b) Go down the aisles and grab what you like?
When eating out do you?
a) Split an appetizer, order the most reasonable entrée, drink
water and skip dessert?
b) Order something from each menu item – drinks, appetizer,
entrée, etc?
When going out on the weekend do you?
a) Pick up the tab for your friends?
b) Split everything right down the middle?
4
Knowing the Basics 101
5
Checking Account Tips
1. Only write checks you know your
account can cover.
2. Whenever you deposit money or
withdraw money, write it down in
the check register immediately.
3. Balance your checkbook on a
monthly basis.
4. Triple check your work!
5. Report lost or stolen checks
immediately!
6
ATM Card – Safety Tips
• Always keep your ATM card in a
safe place.
• Keep your PIN (password) a
secret.
• Beware of your surroundings.
• Always take your receipt
• Count it later.
• Take a trusted person with you.
7
Debit Cards – Frequently Asked
Questions
• What is a Debit Card? Debit cards look like credit
cards or ATM cards, but operate like cash or a
personal check.
• What is the Difference Between a Debit Card & a
Credit Card? Debit means subtracting money from
your savings or checking account to pay for products
now, while credit cards are essentially borrowing
money from a lender to pay for products later.
8
In 2001, debit cards accounted for 26 percent of in-store
transactions, compared with 21% for credit cards. This marks
the first time credit cards have fallen behind debit cards American Bankers Association.
• Tips on being a responsible debit card user:
– If you card is lost, stolen or suspected of being
fraudulently used, report the loss immediately to
your bank.
– Hold on to all your debit card receipts.
– Keep track of all debit card purchases.
– Be aware of additional charges.
9
Yes, You Can Save Money!
•
•
•
•
•
•
•
•
Determine needs vs. wants
Brown bag your lunch
Use coupons
Rent textbooks from the library or
purchase used textbooks
Participate in free community or school
activities
Rent movies, instead of going to the
theater.
Ask about student discounts
Take the bus or walk
10
Budgeting 101
• An organized way of
managing your income
and expenses on a
monthly basis.
• A key tool in financial
management.
11
Budgeting Guidelines
• Keep it Flexible
• Keep it Simple
• Be Honest & Realistic
• Keep Accurate Records
• Budget for the Unexpected
• Pay Yourself First
12
Creating a Budget
1. Determine Your Monthly Income
2. Determine Your Expenses (living, auto,
school, insurance, entertainment, etc.)
3. Add Up Total Monthly Expenses
4. Subtract Monthly Expenses from Income
5. There’s Your Balance
13
Credit is a Privilege – Not a Right
• Credit is easy to get,
but people often
misuse it.
– Credit is not extra
money or a monthly
bonus.
– Essentially, credit is
borrowing money to
make purchases with
the promise that you
will pay it back.
14
When Choosing Credit Cards…
• Get all terms and conditions in
writing.
• Understand pre-approved and
low introductory offers
• Check the cards policies on
privacy
• Shop around for the best deal
15
Read The Fine Print
• All cards have a late fee.
– Some late fees are as high as $35
– The average late fee is $29
• Finance charges apply for late
payments & exceeding monthly
balances.
– Most cards have a minimum finance
charge of 50 cents
• Some cards have an annual fee,
others do not.
– The annual fee is charged to your card
once a year whether you use the card
or not.
16
The Truth About Credit Cards
• The Annual Percentage Rate
(APR) is a yearly measure of the
cost of credit.
– Some cards have an APR as high as
24%
– The majority of cards have an APR
between 18% and 21%
– The average interest rate is 19%
– First time users usually have a
higher interest rate.
17
The Truth About Credit Cards
• You might think that when you make a $1,000
purchase and make the minimum payment ($50),
your next bill will have $950 left, but:
– If your APR is 18% you are charged a portion of
that per month:
• 18/12 = 1.5%
• Take 1.5% of $950 = $14.25
• You now owe $964.25 instead of $950
• In other words, your original purchase of
$1,000 with interest charges turned into
$1,014.25 in the first month.
• Therefore, if you devoted $50 to the debt
every month, it would take you 24 months to
pay it off.
18
Credit Card Tips
• Keep a record of your credit card’s customer service
number and Web site address in case your card is lost
or stolen .
• Create a monthly credit budget and stick to it.
• Open and review your bill every month.
• Save receipts from all credit card purchases.
• Don’t pay your bills late.
• Don’t apply for more cards than you can handle.
• Pay off your credit card balance every month.
19
Credit Reports
• Everyone starts life with a good
credit rating.
– When you are late with a payment,
your credit rating is negatively affected.
– A poor credit rating will affect you for
several years.
– You may have trouble in the future
getting:
• Car loans
• Home loans
• Other credit cards
• Insurance
• Employment
20
Credit Reports
• A credit report is a factual record regarding an individual’s
credit history. It is primarily used by credit grantors to
determine whether or not to grant a person credit.
• Individual credit reports consist of:
– Negative Credit Ratings
– Positive Credit Ratings
– Personal Information
– Previous Credit History Requests
– Personal Statements Made to Report
21
Frequently Asked Questions
• How can I get a copy of my credit report?
– For a small fee (around $9) you can request a copy of
your credit report at anytime.
– Under the Fair Credit Reporting Act credit reports are
free under certain circumstances.
• Credit reporting agencies can be found in your local yellow
pages, or by contacting the three largest credit bureaus:
– Equifax, Inc: www.equifax.com or (800) 685-1111
– Experian: www.experian.com or (888) 377-3742
– Trans Union Corporation: www.tuc.com or (800) 888-4213
22
Frequently Asked Questions
• When Should I Request a Copy of My Report?
– Before major purchases such as a home or new car
– Before applying for employment
– If you feel you are a victim of credit fraud
• What Should I Do If I Find an Error?
– Carefully re-examine your report from all three credit
bureaus. If you have trouble understanding the reports
contact them for assistance.
– If you find an error call or write the credit bureau(s) to
dispute any incorrect information.
– If you continue to disagree, add a personal statement to your
report.
23
Tips to Reduce Credit Fraud
It is estimated that $2-3 billion of the more than $1 trillion U.S.
consumer credit card debt is due to credit card fraud losses – Experian
• Never give your card number to unfamiliar
companies or on-line sites without a security
feature.
• Don’t leave receipts, statements or other account
information lying out for everyone to see.
• Be careful when disposing of mail order catalogs
that include a customer number.
• Shred all pre-approved credit card offers.
• Sign your card as soon as you receive it.
• Limit the number of credit cards you carry
• Report a lost or stolen card or billing error
immediately
24
How to Recover From a Stolen
Wallet
• Cancel all credit and
bank cards.
• Call the three largest
credit reporting
agencies.
• File a police report
• Make a list of items in
your wallet.
25
Five Financial Danger Signs
• Do you pay only the
monthly minimum.
• Do you miss payments.
• Do you write checks your
account can’t cover.
• Do you put everything on
credit
• Do you find it hard to save.
26
What Can I Do If I Can’t Pay
My Bills?
• Realize you have a problem.
• Stop using your credit cards.
• Add up all your debt to
determine your current
financial situation.
• Contact your creditors.
27
Don’t Be Afraid to Scream for Help
• Credit Counseling Services
– This non-profit service provides
financial counseling to
consumers for free or a small
charge.
– They are neither charitable or
lending institutions.
– Beware of companies that offer
to wipe clean your credit history.
– To locate the service nearest you
call (800) 388-2227.
28
What To Do If Your
Contacted By a Collector?
• Don’t panic
• Don’t get angry
• Work with the collector
• Listen
• Be Honest
29
Quiz Your Knowledge Of
Personal Finance.
(Multiple choice!)
30
Who Said, “The income tax has
made more liars out of the American
people than golf has?”
•
•
•
•
A.
B.
C.
D.
Steve Forbes
Benjamin Franklin
Arnold Palmer
Will Rogers
31
The most bitter squabbles about
money have occurred over • A. Failure to record ATM withdrawls
• B. Deciding to do it yourself vs. hiring a
professional
• C. Filling out Tax Returns
• D. All of the above
32
If you have a $2,000 balance at 18% on a
credit card and your minimum payment is 2%
of the balance, how long will it take to pay off
this debt making the minimum payments?
•
•
•
•
A.
B.
C.
D.
3 years
5 years
10 years
31 years
33
Same scenario - how much interest
will you pay on this credit card?
•
•
•
•
A.
B.
C.
D.
$360
$400
$2,931
$4,931
34
If you have a $50,000 home mortgage at
8% for 30 years and you paid an additional
$100 per/ month, how much interest could
you save?
•
•
•
•
A.
B.
C.
D.
$10,000
$20,500
$44,131
$50,000
35
Where To Go For Additional
Information?
• ACA International
• (952) 926-6547
• www.collector.com
• National Foundation for Credit Counseling
• (800) 388-2227
• www.nfcc.org
• CBM Credit Education Foundation, Inc.
• (608) 663-5000
• www.cbmfoundation.org
36