Credit Card Debt Good vs. Bad Debt 12 th Grade Advisory Activity Basic Credit Card Information Credit card average interest rate: 16-17% When credit card bills are paid off within a month, no interest is paid
Download Presentation - The PPT/PDF document "Credit Card Debt Good vs. Bad Debt" is the property of its rightful owner. Permission is granted to download and print the materials on this web site for personal, non-commercial use only, and to display it on your personal computer provided you do not modify the materials and that you retain all copyright notices contained in the materials. By downloading content from our website, you accept the terms of this agreement.
Credit Card Debt Good vs. Bad Debt
Presentation on theme: "Credit Card Debt Good vs. Bad Debt"— Presentation transcript:
Credit Card DebtGood vs. Bad Debt 12th Grade Advisory Activity
Basic Credit Card Information Credit card average interest rate: 16-17%When credit card bills are paid off within a month, no interest is paidCredit card companies require payment of at least 3% of the principal every month
A Student’s StoryListen for:Payment on the student’s $7,000 debt takes up __% of her earningsMinimum payments on a $2000 credit card bill will take ___ years to pay off debt (Click on the picture to play the video)
Credit Card Scenario #1 Mai charges $1,000 to her credit card for a vacation Her credit card interest rate is high: 20%She only pays the minimum amount per month: 3% of the principal which is $30It takes her 25 years to pay off the debt Mai pays a total of $2,224.06 $1,000 of principal, $1,224.06 of interest That is a major way credit card companies make money
Credit Card Scenario #2 Ed has bad credit rating for not paying previous loansHis interest rate is abysmal because of this: 37%For the same $1,000 loan Ed paid $24,040.81 in interest Mai paid $2,224.06 It took Ed 50 years to pay back the debt These types of situations are too common
Calculating Compound InterestIt is not difficult TA is Total Amount Paid on Loan P is Principal Amount (how much was borrowed) i is Interest Rate of the loan (compounded annually) Most credit card debt is compounded daily but we will just compound the loan annually to keep the math problem simpler. is the number of loan years TA = $1,000: Amount borrowed 14%: interest rate for the credit card (Average rate) 3: Number of years to pay of the loan TA = $1,481.54 $1,481.54 is the amount paid on a $1,000 loan $1,521.54 is the amount paid when compounded daily
What is Good and Bad Debt? Good Debt Need a necessity but do not have the money to buy itTaking out loans: can afford the monthly paymentsCreates value and provides way to earn more moneyBad DebtThings that can be consumed fairly quickly with no or little cash or personal value Buying something you really do not need Cannot afford the monthly payments Paying high interest on loans
Credit Cards and DebtPaying credit card interest This is usually a bad debtIf you use a credit card, only charge a total amount you can pay in full every monthThis is often not bad debt
Credit Card Debt Good vs. Bad Debt - Description
Credit Card Debt Good vs Bad Debt 12 th Grade Advisory Activity Basic Credit Card Information Credit card average interest rate 1617 When credit card bills are paid off within a month no interest is paid ID: 768940 Download Presentation
by . T. Current as of September 2014. U.S. household consumer debt profile:. Average credit card debt: . $15,607. . Average mortgage debt: . $153,500. . Average student loan debt: . $32,656. . In total, American consumers owe:.
Outstanding money owed by consumers. Examples. Credit Card Debt. Student Loans. Mortgages. Why Is This Important?. Americans Love Debt. At the end of 2010, Americans had $1,117,000,000 in CREDIT CARD DEBT.
Agenda. Start time: ____ . Break time: ____ (10 minutes). End time: ____. . Please set phones to silent ring and answer outside of the room.. How I Feel About Credit and Debt. How do you feel about being in debt? Here are some sample statements. Check the one that is closest to your own attitude..
What would be considered good credit?. On average how many credit cards does the average household have?. How do credit cards make money?. Video. Who are credit card companies best and worst customers?.
What are things you want to buy right now?. Are they wants or needs?. What is Debt?. When someone owes more money than they have.. Questions to Ask your self before spending. Can I afford it?. How will I pay for it?.
To define debt and identify the various types of debt and bankruptcy.. To differentiate between good debt and bad debt.. To analyze the different social and economic consequences of bankruptcy.. To identify the sources and consequences of excessive debt..
Average Mortgage Debt: $150,000 . Average Student Debt: $33,000 . What is debt?. Debt . - M. oney owed . to a lender for a set of terms . including . time frame, interest rate, and repayment . schedule.
By Kirsten Crame & Chris Morton. Disclaimer: the opinions expressed in this presentation are those of Chris Morton and/or Kirsten Crame and are not necessarily the opinions of Crowe Horwath. . EVERYTHING YOU NEED TO KNOW ABOUT FINANCE.