Get Smart About Credit

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Get Smart About Credit
Revised 2005
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Marsha A. Goetting Ph.D., CFP, CFCS

• Professor Extension Family Economics
  Specialist
• Department of Agricultural Economics Economics

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Warm up fun questions about credit
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Question

• What is the average combined education loans
  credit card balances for college seniors?

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Average combined education loans credit card
debt
20,402
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Graduating seniors student loan debt
17,140
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Graduating seniors credit card debt
3,262
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Question

• How many credit cards does average American
  household use?

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Credit Cards the Average household uses
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Question

• Whats the average credit card balance owed by
  American households?

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Credit Card Balance
8,000
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Question

• What is the average credit card balance of
  senior citizens?

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Senior Citizen Balance
4,041
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Question

• What percent of credit card holders say they
  hardly ever pay the balance in full?

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Hardly ever pay in full
35
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Packet Contents
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Credit Card Smarts Calculator
Special Feature
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Blue Side--Side 1

• Paying Just 2 on Your Credit Card Debt
• Check the REAL cost

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Credit Card Debt

• Julie
• 2,000

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Side 1-Blue

• Pay Back 6,183
• Interest Charges 4,183
• Years to pay off 23

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Yellow Side 2

• Pay MORE than 2 and Save a LOT

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Side 2-Yellow

• 2,000 debt
• First payment 40
• Years in debt 23
• Interest paid 4,183

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Boost to 3

• First payment 60
• Years in debt 11
• Interest paid 1,654
• Interest saved 2,529

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Double Minimum

• First payment 80
• Years in debt 8
• Interest paid 1,051
• Interest saved 3,132

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Worksheet--White

• My Credit Card Situation
• ??????

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for extra payments

• Purple Worksheet
• The Case of the Missing Money, or the 645
  Snack, or Where Can I Find Money to Boost My
  Monthly Credit Card Payments

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for extra payments

• List the Item
• Cost per day
• Cost per week (day x 5 or 7)
• Cost per month (week x 4)
• Cost per year (month x 12)

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Credit Report

• Fact Sheet (salmon color)
• How to Get Your Free Credit Report

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Three Nationwide Agencies

• Annual Credit Report Report Request Form

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Credit Score

• Fact Sheet (green)
• What Does Your Credit Score Say About You

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FICO Score

• Payment history
• Amount owed
• Length of credit history
• New credit
• Types of credit in use

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Boosting Scores

• Pay bills on time
• Keep low balances
• Pay off debt
• Apply for new only when needed

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Debt

• Fact sheet
• (Dark yellow)
• How much debt is too much?

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Debt Ratio

• A. Outstanding loan balance
• B. Take home pay
• C. Divide A by B

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Debt ratio

• 1/3 limit
• Of whats left after youve paid your basic
  living expenses

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Question

• Housing Debt
• 1/4 to 1/3 of monthly take home pay

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Housing Debt

• Shouldnt be more than 2 to 2 ½ times before-tax
  annual income

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PowerPay

• Fact Sheet
• Reduce Your Debts the PowerPay Way

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Pay credit payments as usual

• First loan 150
• Second loan 50
• Third loan 75
• Total 275

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PowerPay

• When first loan is paid off, that payment is
  applied to the next loan

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First Loan Paid Off

• First loan 0
• Second loan
• 150 50 200
• Third loan 75
• Total 275

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PowerPay

• When loan 2 is paid off, add that payment to
  next loan

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Second Loan Paid Off

• 1st 2nd loan 0
• Third loan 275
• (150 75 50)
• Total 275

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PowerPay

• Continue until all loans are paid off

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Benefits

• Reduce time on loan
• Save in interest costs

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3 Ways

• On-line
• Purchase CD
• Complete form

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Selecting a Credit Card
Fact Sheet
MontGuide 199802
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Purposes

• Compare credit card terms already accepted with
  offers received in mail and/or over phone

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Purpose

• Find credit cards with terms best suited for
  your spending repayment habits

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Federal Truth in Lending Law
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Schumer Box
Grace Period
Finance Charges
Annual Fees
APR
Not less than 25 days
.50
20 per year
19.9
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Schumer Box

• Annual Percentage Rate
• Grace Period
• Minimum Finance Charges
• Balance Calculation Method
• Annual Fees
• Fees for Cash Advances
• Late Payment Fees

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Packet Feature

• Credit Card Tracker
• Date
• Description of charge
• Amount Charged

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Packet sponsors

• MSU Extension Service
• First Interstate BancSystem Foundation
• Montana Credit Unions for Community Development

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Evaluation

• Blue Form

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Get Smart About Credit
Revised 2005