Successfully reported this slideshow.
We use your LinkedIn profile and activity data to personalize ads and to show you more relevant ads. You can change your ad preferences anytime.

Consumer Credit Education Presentation


Published on

The CARE programs teaches young people the implications of living with bad credit and educates them on the ins and out of using consumer credit wisely.

Published in: Economy & Finance, Business
  • Be the first to comment

  • Be the first to like this

Consumer Credit Education Presentation

  1. 1. The C.A.R.E. Program Credit Abuse Resistance Education Program
  2. 2. C.A.R.E. <ul><li>The C.A.R.E. program was founded by the Honorable John C. Ninfo, II, Bankruptcy Judge for the Western District of New York. </li></ul><ul><li>As of March 2007, the C.A.R.E. program is in 39 states and the District of Columbia. </li></ul>
  3. 3. A Word from the Founder <ul><li>“It is the hope of the program that students will not go down the road of consumer credit abuse once they understand: </li></ul><ul><li>(1) the true cost of consumer credit; </li></ul><ul><li>(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; </li></ul>
  4. 4. A Word from Judge Ninfo <ul><li>(3) the many consequences of bad credit , which is becoming more common; </li></ul><ul><li>(4) the need to have savings and how to effectively budget with a view towards NEEDS versus WANTS; </li></ul>
  5. 5. A Word from Judge Ninfo <ul><li>(5) that just maintaining debt is not being able to afford it, affording debt is being able to pay it back; and </li></ul><ul><li>(6) it is better to live consumer debt free.” </li></ul>
  6. 6. The Need for Credit Education <ul><li>68% of teens report that they have not had a meaningful discussion about responsible credit card use with their parents. </li></ul><ul><li>31% of teens, 18-19 years of age, have credit cards in their own name. </li></ul><ul><li>71% of young adult cardholders revolve their balances compared to 55% of all cardholders. </li></ul>
  7. 7. The Need for Credit Education <ul><li>People under the age of 25 are one of the fastest growing groups of bankruptcy filers. </li></ul><ul><li>One out of five young adult households are in debt hardship – meaning that over 40% of their income goes to debt payments each month. </li></ul><ul><li>In the last decade, young adults (ages 18-24) saw credit card debt increase 104%. </li></ul>
  8. 8. The Need for Credit Education <ul><li>Graduating college students average $20,402 of debt - $3,262 of that is credit card debt. </li></ul>
  9. 9. The Need for Credit Education <ul><li>18% is the current average starting interest rate for students and young adults. </li></ul>
  10. 10. The Cost of Credit Card Debt
  11. 11. Paying Interest – Less Savings <ul><li>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. </li></ul><ul><li>This is truly SCARY </li></ul>
  12. 12. The Cost of Credit Card Debt <ul><li>An American consumer with $10K in credit card debt, paying an average interest rate of 14% will pay $117 per month in interest alone. </li></ul><ul><li>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). </li></ul>
  13. 13. Making the Minimum Payment <ul><li>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. </li></ul>
  14. 14. The Cost of Credit Card Debt <ul><li>Minimum Payment vs. Fixed Payment </li></ul><ul><li>($2,000 at 18% Interest) </li></ul>$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
  15. 15. 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
  16. 16. The Importance of Good Credit
  17. 17. The Importance of Good Credit <ul><li>Your history of payments, employment, and salary makes you a good candidate for a loan. </li></ul>
  18. 18. 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
  19. 19. The Importance of Good Credit <ul><li>You will be viewed as financially trustworthy and given better loan terms. </li></ul><ul><li>It may help you get a car loan , rent an apartment and obtain employment. Most landlords and prospective employers WILL look at your credit report. </li></ul>
  20. 20. Consequences of Credit Abuse <ul><li>Credit abuse may make it impossible to complete a degree. </li></ul><ul><li>Denial of employment, credit, student loans, or leases. Higher interest rates and higher insurance rates. </li></ul><ul><li>Bad credit rating. </li></ul><ul><li>Emotional stress, divorce, and family problems. </li></ul><ul><li>Bankruptcy. </li></ul>
  21. 21. Avoiding Credit Abuse <ul><li>Distinguish between wants and needs. </li></ul><ul><li>Have only one credit card. Opt for a low credit limit on that one card. </li></ul><ul><li>Pay off your balance each month. </li></ul><ul><li>Never make only the minimum payment. </li></ul>
  22. 22. This presentation was developed by the good folks at C.A.R.E. Learn more about this amazing financial literacy program at Your Guide to Living in Today’s World with Bad Credit