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Borrowing on Open Account: Credit Card Problems

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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Borrowing on Open Account: Credit Card Problems

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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

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