Personal Finance Education Overcoming Financial Hurdles

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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

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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.

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Five Things Every High School Senior Should Know
Before Leaving Home

• How to Balance a Checkbook
• How to Read a Credit Report
• The Difference Between a Credit Card and a Debit
  Card
  
• Ways to Save Money
• How to Create a Monthly Budget
• B

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Are You Spending Money Wisely?

• When you go grocery shopping do you?
• Create a list and stick to the items on that
  list?
  
• Go down the aisles and grab what you like?
• When eating out do you?
• Split an appetizer, order the most reasonable
  entrée, drink water and skip dessert?
  
• Order something from each menu item drinks,
  appetizer, entrée, etc?
  
• When going out on the weekend do you?
• Pick up the tab for your friends?
• Split everything right down the middle?

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Knowing the Basics 101
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Checking Account Tips

• Only write checks you know your account can
  cover.
  
• Whenever you deposit money or withdraw money,
  write it down in the check register immediately.
  
• Balance your checkbook on a monthly basis.
• Triple check your work!
• Report lost or stolen checks immediately!

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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.

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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.

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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.

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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

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Budgeting 101

• An organized way of managing your income and
  expenses on a monthly basis.
  
• A key tool in financial management.

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Budgeting Guidelines

• Keep it Flexible
• Keep it Simple
• Be Honest Realistic
• Keep Accurate Records
• Budget for the Unexpected
• Pay Yourself First

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Creating a Budget

• Determine Your Monthly Income
• Determine Your Expenses (living, auto, school,
  insurance, entertainment, etc.)
  
• Add Up Total Monthly Expenses
• Subtract Monthly Expenses from Income
• Theres Your Balance

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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.

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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

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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.

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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.

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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.
  
  

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Credit Card Tips

• Keep a record of your credit cards 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.
• Dont pay your bills late.
• Dont apply for more cards than you can handle.
• Pay off your credit card balance every month.

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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

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Credit Reports

• A credit report is a factual record regarding an
  individuals 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

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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 [phone]
• Experian www.experian.com or [phone]
• Trans Union Corporation www.tuc.com or (800)
  888-4213

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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.
  

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Tips to Reduce Credit FraudIt 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.
  
• Dont 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
  

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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.

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Five Financial Danger Signs

• Do you pay only the monthly minimum.
• Do you miss payments.
• Do you write checks your account cant cover.
• Do you put everything on credit
• Do you find it hard to save.

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What Can I Do If I Cant 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.

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Dont 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.
  

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What To Do If Your Contacted By a Collector?

• Dont panic
• Dont get angry
• Work with the collector
• Listen
• Be Honest

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Quiz Your Knowledge Of Personal Finance.

• (Multiple choice!)

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Who Said, The income tax has made more liars out
of the American people than golf has?

• A. Steve Forbes
• B. Benjamin Franklin
• C. Arnold Palmer
• D. Will Rogers

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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

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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. 3 years
• B. 5 years
• C. 10 years
• D. 31 years

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Same scenario - how much interest will you pay on
this credit card?

• A. 360
• B. 400
• C. 2,931
• D. 4,931

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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. 10,000
• B. 20,500
• C. 44,131
• D. 50,000

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Where To Go For Additional Information?

• ACA International
• [phone]
• www.collector.com
• National Foundation for Credit Counseling
• [phone]
• www.nfcc.org
• CBM Credit Education Foundation, Inc.
• [phone]
• www.cbmfoundation.org