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Controlling Your Credit Card Spending. Set goalsDevelop a budgetTrack your credit spendingRecord all credit purchases in a ledger. How much credit can you stand?. Total monthly consumer credit paymentsMonthly take-home payMonthly consumer credit payments (excluding mortgage) should not excee
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1. Chapter 6 Borrowing on Open Account: Credit Card Problems
2. Controlling Your Credit Card Spending Set goals
Develop a budget
Track your credit spending
Record all credit purchases in a ledger
3. How much credit can you stand?
4. Applying the debt resolution rule
Are you able to pay off short-term debt within 4 years?
How much credit can you stand?
5. Stay Out of Trouble in the First Place! Well clean up your credit history!
$50 gets you approved for a loan regardless of credit history! Quiz on page 195.
Pay only the minimum each month?
Reached spending limit on one or more cards?
Do you use credit card for impulse purchases? For necessities?
Do you get cash advances because your check account is empty?
Been turned down for credit or had a card cancelled?
How much of your bill is for interest?
Are you still paying off Christmas when the next Christmas arrives?Quiz on page 195.
Pay only the minimum each month?
Reached spending limit on one or more cards?
Do you use credit card for impulse purchases? For necessities?
Do you get cash advances because your check account is empty?
Been turned down for credit or had a card cancelled?
How much of your bill is for interest?
Are you still paying off Christmas when the next Christmas arrives?
6. Reducing Your Balance Pay more than minimum monthly payment
Find a card with a lower interest rate With an interest rate of 15%, paying the minimum 2% of balance monthly would take you 79 months (6.6 years!) to repay IF you dont buy anything else on the card!With an interest rate of 15%, paying the minimum 2% of balance monthly would take you 79 months (6.6 years!) to repay IF you dont buy anything else on the card!
7. Pay Extra on Credit Card Bills $2,000 balance at 15% per year (1.25% per month)
Pay minimum 2% = $40 79 months 6.60 years
Pay an extra $10 = $50 56 months 4.67 years
Pay an extra $20 = $60 44 months 3.67 years
8. Paying off credit card debt
9. Resolving Billing Errors You may withhold payment for a disputed charge.
You must notify the card issuer within 60 days of the statement date if there is a problem. Credit cards provide you a degree of safety with a merchant you do not know well. You may dispute the charge by filing a petition.
Note: During any appeal the card issuer has the right to report your account as delinquent. This could have an adverse effect on your credit rating.
Credit cards provide you a degree of safety with a merchant you do not know well. You may dispute the charge by filing a petition.
Note: During any appeal the card issuer has the right to report your account as delinquent. This could have an adverse effect on your credit rating.
10. Protecting Against Fraud Save your credit card receipts.
Compare them to your statement.
Destroy old receipts.
Use caution when giving out your credit card number.
Never leave a store without your card.
Protect your Social Security number You dont have to have social security number on your drivers license. Dont give it out. It can be used to access your credit reports (to get credit card numbers), medical files, tax information, etc.
When you next renew your license, insist it be left off.You dont have to have social security number on your drivers license. Dont give it out. It can be used to access your credit reports (to get credit card numbers), medical files, tax information, etc.
When you next renew your license, insist it be left off.
11. Identify Theft: What Can Happen? Credit card bills
New credit card
Line of credit
Change DMV information
Ruin credit
Years of hassles
12. Identify Theft: Immediate Response Cancel credit cards (have toll-free numbers available)
File police report in jurisdiction where card stolen
Call credit bureaus to place fraud alert on your name and SSN
Maximum liability is $50 (or $0 if you report before stolen card is used) FTC booklet to help www.consumer.gov/idtheft
Equifax: 800-997-2493 or www.equifax.com
Experian: 888-397-3742 or www.experian.com
Trans Union: 800-888-4213 or www.transunion.com
Check for stolen numbers at www.Cardcops.com
13. Debit Cards Hidden Costs Use with PIN or signature
57% of banks charge fee with PIN
Merchants pay big fees with signature banks like it
Stolen card: Liable for $0 if report before used; maximum is $50 reported within 2 days; reported 2-60 days maximum is $500; reported after 60 days can wipe out checking and savings accounts
Charge up to $32 if debit card purchase bounces
14. Consumer Debt Problems* Bankruptcies: 1.6 million in 2003 versus 1.5 million in 2002
Record consumer debt (credit cards and auto loans) at $1.98 trillion in Oct. Car repossessions: 1.3 per 1,000 loans in 2003 from 0.84 in 2000.
Credit card delinquency rate: 4.34% in 2003 from 4.08% in 2000
Mortgage foreclosures: 1.15% in 2003 from 0.87% in 2000
15. Debt
16. What to Do If You Cant Pay Your Credit Card Bills Get on a budget immediately!
Find least expensive credit card
Consider using savings to pay off debts
Consolidate your debts with a home equity loan or unsecured personal loan
Talk to the creditor about restructuring the debt repayment. Credit card companies may agree to settle for a fraction of your debt.
Seek help from a credit counselor.
Declare bankruptcy last resort!
If credit card interest is 15% yet you earn 6% on your savings, you are better off paying off debt BUT NOT if that makes you illiquid.If credit card interest is 15% yet you earn 6% on your savings, you are better off paying off debt BUT NOT if that makes you illiquid.
17. Chapter 13 Personal Bankruptcy, The Wage Earners Plan (30%) Must have less then $750K in home and other secured debt and $250K in unsecured debt
Sets-up a controlled repayment schedule
Allows you to maintain possession of your assets
Is reported on your credit report for seven years
18. Chapter 7 Personal Bankruptcy, Straight Bankruptcy (70%) Simplest and cheapest form
Consult financial advisor and lawyer
Eliminate most debts and begin again
Liquidation of most assets
Keep some equity in house (amount varies by state)
19. Youll Still Owe Back taxes
Student loans
Alimony
Child support
Debts incurred through fraud
20. Record High Bankruptcy Filings
21. Delinquency Rates
22. Questions