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Instructors Presentation (PowerPoint) Presentation Transcript

  • 1. C.A.R.E. Credit Abuse Resistance Education Program
  • 2. C.A.R.E. A Program of: U.S. Bankruptcy Courts of West Virginia The West Virginia State Bar The WV Bankruptcy Law Committee
  • 3. C.A.R.E.
    • The C.A.R.E. program was founded by the Honorable John C. Ninfo, II, Bankruptcy Judge for the Western District of New York.
    • As of March 2007, the C.A.R.E. program is in 39 states and the District of Columbia.
  • 4. C.A.R.E.
  • 5. A Word from Judge Ninfo
    • “It is the hope of the program that students will not go down the road of consumer credit abuse once they understand:
    • (1) the true cost of consumer credit;
    • (2) how difficult it is to repay consumer debt incurred to buy and do things that you really can’t afford and don’t need;
  • 6. A Word from Judge Ninfo
    • (3) the many consequences of financial problems, which are becoming more numerous and serious;
    • (4) the need to have savings and how to effectively budget with a view towards needs versus wants;
  • 7. A Word from Judge Ninfo
    • (5) that just maintaining debt is not being able to afford it, affording debt is being able to pay it back; and
    • (6) it is better to live consumer debt free.”
  • 8. The Need for Credit Education
    • 68% of teens report that they have not had a meaningful discussion about responsible credit card use with their parents.
    • 31% of teens, 18-19 years of age, have credit cards in their own name.
    • 71% of young adult cardholders revolve their balances compared to 55% of all cardholders.
  • 9. The Need for Credit Education
    • People under the age of 25 are one of the fastest growing groups of bankruptcy filers.
    • One out of five young adult households are in debt hardship – meaning that over 40% of their income goes to debt payments each month.
    • In the last decade, young adults (ages 18-24) saw credit card debt increase 104%.
  • 10. The Need for Credit Education
    • Graduating college students average $20,402 of debt - $3,262 of that is credit card debt.
  • 11. The Need for Credit Education
    • 18% is the current average starting interest rate for students and young adults.
  • 12. The Cost of Credit Card Debt
  • 13. Paying Interest – Less Savings
    • 43% of Americans spend more than they make, and in 2005, for the first time since the Great Depression, our savings rate in this country was negative.
  • 14. The Cost of Credit Card Debt
    • An American consumer with $10,000 in credit card debt, paying an average interest rate of 14% will pay $117 per month in interest alone.
    • If they could invest that same amount each month of their work life (approximately 40 years), it would grow to $307,103 (assuming a 7% return).
  • 15. Making the Minimum Payment
    • Paying the minimum monthly payment on $2,000 with a 31% interest rate will take 15.6 years to pay off the debt at a total cost of $5,348.15, including $3,348.15 in interest.
  • 16. The Cost of Credit Card Debt
    • Minimum Payment vs. Fixed Payment
    • ($2,000 at 18% Interest)
    $2,477.99 $3,115.69 Total Purchase Cost $477.99 $1,115.69 Total Interest Paid 2.6 9.5 Years to Pay Off Fixed Monthly Payment of $80 Minimum Monthly Payment
  • 17. Cash vs. Credit $410 $420 $435 Amount repaid $32.00 $56.00 Finance Charge $35.00 $36.25 Monthly Payment 12 12 Number of Monthly Payments 13% 27% APR $410 $388 $379 Cash Price Store C Store B Store A
  • 18. The Importance of Good Credit
  • 19. The Importance of Good Credit
    • Your history of payments, employment, and salary makes you a good candidate for a loan.
  • 20. Better Loan Terms 12% 10% 8.0% APR $1,320.12 $808.09 $427.27 Finance Charge $6,320.12 $5,808.09 $5,427.27 Total Repaid 48 36 24 Number of Payments $131.67 $161.34 $226.14 Monthly Payment $5,000 $5,000 $5,000 Amount of Loan Lender 3 Bank Lender 2 Dealership Lender 1 Credit Union
  • 21. The Importance of Good Credit
    • You will be viewed as financially trustworthy and given better loan terms.
    • It may help you rent an apartment and obtain employment – most landlords and prospective employers will look at your credit report.
  • 22. Consequences of Credit Abuse
    • Credit abuse may make it impossible to complete a degree.
    • Denial of employment, credit, student loans, or leases. Higher interest rates and higher insurance rates.
    • Bad credit rating.
    • Emotional stress, divorce, and family problems.
    • Bankruptcy.
  • 23. Avoiding Credit Abuse
    • Distinguish between wants and needs.
    • Have only one credit card. Opt for a low credit limit on that one card.
    • Pay off your balance each month.
    • Never make only the minimum payment.
  • 24. Bringing C.A.R.E. to Your Classroom Please visit the C.A.R.E. website at www.careprogram.us