college student budget mini

7/25/2019 College Student Budget Mini

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Indiana Department of Financial Institutions

A COLLEGE STUDENT

BUDGET

A Mini-lesson for:

secondary school teachersstudents, high school and collegeadult and community educators

This lesson includes learning objectives, background information,discussion questions, a budgeting activity and additional sources of

information.

Objectives

Students will:

design a personal budget for a college student

consider credit card use by college students


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epenses, interest, dividends, gifts, grants, scholarships.

*ist fied and fleible epenses. +ied epenses are eact amounts due on aspecific date. +leible epenses include money spent on wants and needs

that are irregular in nature.

eview and modify the plan. (f epenses eceed income identify ways toincrease income or reduce epenses. This is not rocket science, but doing itright is terribly important to your economic well"being at college.

-eer pressure and conveniences such as automatic teller machines can play havoc withstudent budgets because ready cash makes it easy to buy things on a whim. ' budgetcan help you sidestep impulse spending. (t puts you in control of the decision to buy ornot to buy, based on your needs and available cash.

Bu"!et %or&at

The time period of a student budget can be a month, a semester, or the school year.'fter listing all income, estimate how much money you will spend on the fied and

fleible items in your budget. +ied items are a constant and easily defined. +leibleepenses are more difficult to identify because of their changing nature. /eep a dailyrecord of your ependitures for a few weeks to better estimate the kind and amounts ofyour fleible epenses.

%i'e" E'(enses

$ollege room and board

dormitory meal plan or off"campus housing.

$ar payment and insurance, if you have a car.


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-ersonal epensestoiletries, haircuts, laundry

$lothingnew purchases, dry cleaning

0ealth $are

prescriptions, doctor or dentist fees

2ther epensessuch as dues and gifts

$ompare total estimated epenses with your total income then adjust the fleibleepenses in order to balance your budget. 4our spending practices will have asignificant effect on shaping your financial security and a budget helps you keepspending in tow. Effective use of a student budget will help you gain the sense of

independence that comes from being in control of your personal financial affairs,whether you have 5plenty of money5 or are operating on a shoestring.

See 6eb Sites on Budgetsat: http:77www.in.gov7dfi7education7budget.htmandhttp:77www.creditunion.coop7download7pers8fin8budget.pdfin 'dobe.

Cre"it Car"s an" Colle!e Stu"ents

4ou will have access to credit cards as a college student. 6hile credit cards are usefulwhen used appropriately, the temptation to overspend can lead to epenses that coulddestroy your budget as well as your financial independence. Students sometimes wiselyuse credit cards to pay for unepected epenses such as medical emergencies, with thefull understanding that it costs money to borrow money if the credit card balance is notpaid in full each month.

4our credit record begins when you establish credit in your name and a history ofrepayment is recorded by credit reporting agencies. 4our credit rating follows youwherever you go and a bad credit rating can affect your ability to get a job or buy a car orhouse.
http://www.in.gov/dfi/education/budget.htmhttp://www.creditunion.coop/download/pers_fin_budget.pdfhttp://www.in.gov/dfi/education/budget.htmhttp://www.creditunion.coop/download/pers_fin_budget.pdf


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See our 6eb Sites on Credit Cardsat:http:77www.in.gov7dfi7education7$(credit8card8infor.htm

&e sure to see 5Warning to Credit Card Kids5 at:

http:77www.in.gov7dfi7education7warning8to8credit. 8card(T


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D)SCUSS)ON *UEST)ONS

). Eplain the advantages of a college student using a budget%

3. 6hat are the steps that you would use to design a budget for your situation%

;. 6hat are your options if your epenses are greater than your income%

?. Suggest uses of a credit card that are appropriate for college students%


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BUDGET)NG *U)+

). The budgeting process starts with monitoring current spending.

True +alse

3. !ost short"term goals are based on activities over the net two or three years.

True +alse

;. ' common long"term goal may involve saving for college for parents of a new"bornchild.

True +alse

?. ent is considered a fied epense.

True +alse

@. +leible epenses stay about the same each month.

True +alse

A. The final phase of the budgeting process is to:

set personal and financial goals. compare your budget to what you have actually spent.


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. 'n eample of a fied epense is:

clothing.

auto insurance. an electric bill. educational epenses.

)=. 6hat is commonly considered a fleible epense%

rent a mortgage payment home insurance entertainment


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BUDGET)NG *U)+ ANS,ES

). The budgeting process starts with monitoring current spending.

False

3. !ost short"term goals are based on activities over the net two or three years.

False

;. ' common long"term goal may involve saving for college for parents of a new"bornchild.

True

?. ent is considered a fied epense.

True

@. +leible epenses stay about the same each month.

False

A. The final phase of the budgeting process is to:

review financial progress.

B ' l f l t l ld b


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BUDGET ,O.S/EET

FI'(D (')(*S(S+

ent7!ortgage.

D

$redit payments

D

(nsurance

D

!edical

D

2ther

D

F,('IB,( (')(*S(S+

+ood D

$lothing D

Transportation

D

0ousehold

D

-ersonal D


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ACT)0)T1

>esign a budget for a college student who receives D;,@== from a parent, earns D@= aweek from student employment, has a D@== tuition scholarship and will use D),=== ofpersonal savings. oom and board epenses are D8888, tuition epenses are D8888.9Hse figures from a local college of choice. The student does not own a car and iscovered by a parent1s health insurance plan. Hse &udget 6orksheet.

Iive your students the Budget 1ui2.

Iive students a copy of our Brochureson a &udget and $redit $ards.

)ower)oint presentation for this !ini"lesson at:http:77www.in.gov7dfi7education7!ini*essons7$ollegeStud&udget!ini.ppt

Sources Of A""itional )nfor&ation

College Basics, How To Start Right and Finish Strong, *unenfeld, !arvin and -eter,&uffalo, F. 4.: Semester -ress. 9)).

Finance 101, !ademoiselle !agaJine, p. );3, 9)@.

How To Teach A Teen The Value Of A Buck, !oney !agaJine, pp. );3");C,9>ecember )@.

ack!"# $our u#il, A %uide For arents And Students &n Their 'o(e Fro) Ho)eTo Ca)#us, /unkel, Kudith 'ustin, San !arcos, $alifornia: Erdmann -ub. 9)).

*ui+ )one- )anage)ent skills. !oreau >an /iplinger1s -ersonal +inance
http://www.in.gov/dfi/education/MiniLessons/CollegeStudBudgetMini.ppthttp://www.in.gov/dfi/education/MiniLessons/CollegeStudBudgetMini.ppt


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bargaining techniques to negotiate with colleges. (t also gives information on how tolocate hard to find scholarships and how to get loan information off the (nternet.

Haggle $our a- To A /ower Tuitionby Tracey *ongo. /iplinger1s -ersonal +inance

!agaJine, pp. A)"A;, 9'pril )A. 'n article that helps parents and students 5learn howto haggle5 to reduce college costs.

How To a- For Ba-2s Collegeby !anuel Schiffres. /iplinger1s -ersonal +inance!agaJine, pp. AB"BA, 9Fovember )?. This article helps parents appreciate theimportance of investing early and thinking growth for college saving. (ncluded in thearticle is a worksheet to determine how much needs to be saved.

101 a-s To 3ee# 'ore Cashby /en Sheets and Ireg Spears. /iplinger1s -ersonal+inance !agaJine, pp. ;3";, 9!ay )A. 'n article that contains a collection of ideasthat help save money for all future financial goals.

Boo2s

College Costs And Financial Aid handookby the $ollege Entrance Eamination&oard. The $ollege &oard, 9)A. D)A. ==. ' comprehensive, well"written source ofinformation on major state and federal scholarship programs, current costs and financialaid options. ' worksheet to estimate financial need is included plus advice on gettingthe full amount of aid.

Co)#lete College Financing %uide, third edition, by !arguerite K. >ennis. &arron1s,9)?. D)?.@. Iives the how, when and where to apply for college scholarships,financial grants and low interest loans. There is information on early financial planningoptions, long term planning for meeting college costs and creative methods of financinga college education.

4on2t 'iss Out, The A)itious Student2s %uide to Financial Aidby obert and 'nna*eider. 2ctameron -ress, 9)3. DB.@=. Iood (nformation on where the money reallyis and also how to get it plus the fundamentals of financial aid and special opportunities.


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selecting and paying for college. +ree, @? pages. $onsumer (nformation $enter, -. 2.&o )==, -ueblo, $olorado C)==3.

The Student %uide, Financial Aid 1667!68. 6ell"written booklet that gives complete

information on all federal student financial aid programs and the requirements for each.+ree, ;? pages. H. S. >epartment of Education, +ederal Student 'id (nformation$enter, -. 2. &o C?, 6ashington, >$ 3==??"==C?

)nternet

Student ,oan 3ar4eting ssociation 9Sallie !ae at: http:77www.salliemae.com

College Board+ Fund Finder at: http:77www.studentservices.com7fastweb

Department of (ducation a: http:77www.ed.gov

What will it ta4e to save for a college education5 at: http:77www.calcbuilder.com7cgi"bin7calcs7S'M?.cgi

Budget Calculators+

6ow 3uch m I Spending5 at: http:77www.calcbuilder.com7cgi"bin7calcs7&H>;.cgi

Should I pa off debt or invest in savings5 at: http:77www.calcbuilder.com7cgi"bin7calcs7&H>?.cgi

What will it ta4e to pa off m balance5at: http:77www.calcbuilder.com7cgi"bin7calcs7&H>@.cgi

6ow much should I set aside for emergencies5 at:http:77www.calcbuilder.com7cgi"bin7calcs7&H>A.cgi

6ow much will it cost to raise a child5 at: http:77www.calcbuilder.com7cgi"bin7calcs7&H>B cgi
http://www.salliemae.com/http://www.studentservices.com/fastwebhttp://www.studentservices.com/fastwebhttp://www.ed.gov/http://www.calcbuilder.com/cgi-bin/calcs/SAV4.cgihttp://www.calcbuilder.com/cgi-bin/calcs/SAV4.cgihttp://www.calcbuilder.com/cgi-bin/calcs/SAV4.cgihttp://www.calcbuilder.com/cgi-bin/calcs/BUD3.cgihttp://www.calcbuilder.com/cgi-bin/calcs/BUD4.cgihttp://www.calcbuilder.com/cgi-bin/calcs/BUD4.cgihttp://www.calcbuilder.com/cgi-bin/calcs/BUD4.cgihttp://www.calcbuilder.com/cgi-bin/calcs/BUD5.cgihttp://www.calcbuilder.com/cgi-bin/calcs/BUD5.cgihttp://www.calcbuilder.com/cgi-bin/calcs/BUD5.cgihttp://www.calcbuilder.com/cgi-bin/calcs/BUD6.cgihttp://www.calcbuilder.com/cgi-bin/calcs/BUD7.cgihttp://www.calcbuilder.com/cgi-bin/calcs/BUD7.cgihttp://www.calcbuilder.com/cgi-bin/calcs/BUD7.cgihttp://www.salliemae.com/http://www.studentservices.com/fastwebhttp://www.ed.gov/http://www.calcbuilder.com/cgi-bin/calcs/SAV4.cgihttp://www.calcbuilder.com/cgi-bin/calcs/SAV4.cgihttp://www.calcbuilder.com/cgi-bin/calcs/BUD3.cgihttp://www.calcbuilder.com/cgi-bin/calcs/BUD4.cgihttp://www.calcbuilder.com/cgi-bin/calcs/BUD4.cgihttp://www.calcbuilder.com/cgi-bin/calcs/BUD5.cgihttp://www.calcbuilder.com/cgi-bin/calcs/BUD5.cgihttp://www.calcbuilder.com/cgi-bin/calcs/BUD6.cgihttp://www.calcbuilder.com/cgi-bin/calcs/BUD7.cgihttp://www.calcbuilder.com/cgi-bin/calcs/BUD7.cgi


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OUT OF CASH

Eperience can be a dear teacher when it comes tooverspending at college. !any students discover, at themost inconvenient and embarrassing times, that theirepenses have eceeded their income"they are out ofcash# The question is what to do. $all home% &orrowfrom the roommate% &oth are short term solutions atbest. ' better solution is to design a budget using theworksheet &udget for college spending and take control

of the cash flow.

College Budgeting 101

The primary purpose of a budget is to design a realisticplan for spending limited financial resources. ' studentbudget requires fleibility to adapt to the changingcircumstances of college life. Essential steps in design"ing a budget are:

(dentify your income sources. (ncome caninclude your allowance from home, take"home pay from student employment,

savings allocated to college epenses,interest, dividends, gifts, grants, scholar"ships.

*ist fied and fleible epenses. +iedepenses are eact amounts due on aspecific date. +leible epenses includemoney spent on wants and needs that areirregular in nature.

eview and modify the plan. (f epenseseceed income identify ways to increaseincome or reduce epenses. This is notrocket science, but doing it right is terribly

important to your economic well"being atcollege.

-eer pressure and conveniences such as automaticteller machines can play havoc with student budgetsbecause ready cash makes it easy to buy things on awhim. ' budget can help you sidestep impulse spending.(t puts you in control of the decision to buy or not to buy,based on your needs and available cash.

BUDGET FORMAT

The time period of a student budget can be a month, a

semester, or the school year. 'fter listing all income,

estimate how much money you will spend on the fiedand fleible items in your budget. +ied items are aconstant and easily defined. +leible epenses are moredifficult to identify because of their changing nature./eep a daily record of your ependitures for a few weeksto better estimate the kind and amounts of your fleibleepenses.

FIXED EXPENSES

$ollege room and board

dormitory mealplan or off"campus housing.

$ar payment and insurance, if you have acar.

0ealth insurance, if not covered by parent1spolicy.

Tuition, a fied epense, may varydepending on course load.

2ther fied epenses, such an emergencyfund and other savings.

FLEXIBLE EXPENSES

&ooks, lab fees, equipment, supplies,tutoring, etc.

Snacks, drinks, groceries, restaurant meals

Telephone bills, including long distance calls

Social and recreation epensessuch as

movies, sporting events

Transportationplane, train, bus, cabs, carmaintenance, and parking

-ersonal epensestoiletries, haircuts,laundry

$lothingnew purchases, dry cleaning

0ealth $areprescriptions, doctor or

dentist fees

2ther epensessuch as dues and gifts

$ompare total estimated epenses with your totalincome then adjust the fleible epenses in order tobalance your budget. 4our spending practices will havea significant effect on shaping your financial security anda budget helps you keep spending in tow. Effective useof a student budget will help you gain the sense ofindependence that comes from being in control of yourpersonal financial affairs, whether you have 5plenty ofmoney5 or are operating on a shoestring.

CREDIT CARDS AND COLLEGE STUDENTS

4ou will have access to credit cards as a college student.6hile credit cards are useful when used appropriately,the temptation to overspend can lead to epenses thatcould destroy your budget as well as your financialindependence. Students sometimes wisely use creditcards to pay for unepected epenses such as medicalemergencies, with the full understanding that it costsmoney to borrow money if the credit card balance is notpaid in full each month.

4our credit record begins when you establish credit inyour name and a history of repayment is recorded bycredit reporting agencies. 4our credit rating follows youwherever you go and a bad credit rating can affect yourability to get a job or buy a car or house.

CREDIT CARD TIPS FOR COLLEGE STUDENTS

Set a credit card limit and stick to it. 6henpossible, pay off credit card balances each month.

(f you pay only the minimum balance on creditcards each month, you will pay interest on the useof the money and it will take time to pay off thetotal debt.

$omparison shop for credit cards. 2n credit

applications, compare the annual percentage rate9'- including finance charges, methods used tocompute charges, the grace period, annual fees,penalties for late payments, and other charges.

4our credit limit may increase when you pay your bills ontime. To avoid overspending, make buying decisions

based on a careful analysis of your financial conditionrather than on the credit limit on your credit cards.


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The (ndiana >epartment of +inancial (nstitutions,>ivision of $onsumer $redit has many other creditrelated brochures available, such as:

'nswers to $redit -roblems'pplying for $redit't 0ome Shopping ights&ankruptcy +acts&uried in >ebt$ar +inancing Scams

$harge $ard +raud$hoosing ' $redit $ard$o"Signing$redit and >ivorce$redit and 2lder $onsumers>eep in >ebt%Equal $redit 2pportunity+air $redit eporting+air >ebt $ollectionIold $ards0ang up on +raud0igh ate !ortgages0ome Equity $redit *ines0ow to 'void &ankruptcy

0ow to $ut the $osts of $redit(dentity Theft*ook &efore you *ease!ortgage *oans2lder $onsumersepossessioneverse !ortgage *oansule of BCs N 6hat is it%Secured $redit $ard ScamsShopping for $reditHsing $redit $ardsMariable ate $redit6hat is a &udget%

6hat is the >+(%

$all our toll"free number or write to the address onthe cover for a copy of any of the brochures listedor for further consumer credit information.

COLLEGESTUDENT

BUDGET

D()8T3(*T -F FI**CI, I*STIT9TI-*S$onsumer $redit >ivision

;= South !eridian Street, Suite ;==(ndianapolis, (ndiana ?A3=?

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15/28

W6T IS B9D0(T5

' budget is a spending planthat you decideupon. (t is based on how much you make9income and what your monthly epenses are.&y understanding your monthly income andepenses, you will be better able to manageyour cash flow and determine how much debt, ifany, you can assume.

6-W D- :-9 FI098( -9T B9D0(T5

4ou can use the following pointers and budget work"sheet to figure out your own monthly budget.

Start with -our inco)e. +igure out yourmonthly take"home pay. That1s the amount youbring home each month after taes, etc. arewithheld.

re#are a list of -our )onthl- fi9ed e9#enses.+ied epenses are the payments that you have to

make each month, many of which are the samesuch as your rent or mortgage payment, utilities9take an average if not budgeted, and any creditpayments you have.

/ist -our )onthl- fle9ile e9#enses5 4ourfleible epenses may vary from month to month,but you can control them more readily than you canyour fied epenses. (n other words, you can decidewhether and how much you will spend on them.

O+leible epensesP include food, clothing, trans"portation, household epenses, and personalspending for entertainment, eating out, and otheritems that you have control over.

D(CID( 6-W 39C6 T- S/( *DSTICK T- IT

(t is important to think of savings as a fied epenseso that you are sure to save a set amount eachmonth. 2therwise, it is easy to spend more on your

fleible epenses and forget about savings.

Services are available through your employer andyour bank to make it easier for you to save. Theseinclude payroll deductions, direct deposit of yourpaycheck, and automatic savings plans.

The budget worksheet will help you determine howmuch you can save.

C8(T( S)(*DI*0 ),*

4ou should be sure to have some savings you canutiliJe in a financial emergency. &ut, you shouldcreate a spending plan that allows you to reduceyour debts. (f you have credit card balances, youshould use your etra money to pay those balancesoff quicker. 6ith"drawing savings from low"interestaccounts to settle high"rate loans will save youmoney in the long run. Etra money sitting in asavings account earning less than @< could bebetter utiliJed by paying off credit card balancesbeing imposed interest at 3)


16/28

The (ndiana >epartment of +inancial (nstitutions,>ivision of $onsumer $redit has many other creditrelated brochures available, such as:

'nswers to $redit -roblems'pplying for $redit't 0ome Shopping ights&ankruptcy +acts&uried in >ebt$harge $ard +raud$hoosing ' $redit $ard

$o"Signing$redit and >ivorce$redit eporting and Scams>ebt $ollection -roblems%>eep in >ebt%Equal $redit 2pportunity+air $redit eporting+air >ebt $ollectionIold $ards0ang up on +raud0igh ate !ortgages0ome Equity $redit *ines0ow to 'void &ankruptcy0ow to $ut the $osts of $redit(dentity Theft

*ook &efore you *ease!ortgage *oans2lder $onsumersepossessioneverse !ortgage *oansule of BCs N 6hat is it%Secured $redit $ard ScamsShopping for $reditHsing $redit $ardsMariable ate $redit6hat is a &udget%6hat is the >+(%

$all our toll"free number or write to the address on

the cover for a copy of any of the brochures listed orfor further consumer credit information.

HAT IS ABUDGET!



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17/28

Credit cards are a great modern invention and are quick,convenient, and helpful in a wide variety of circumstances. However, teens can be especially vulnerable to creditdifficulties and need to be cautioned about the pitfalls ofcredit cards. A credit card may seem like a "free ride" tomany untried and unsuspecting young people and theyend up accumulating a large debt long before they havethe earning power to pay it off.

Around 6 million fulltime college undergraduates nowhave credit cards. !t doesnt matter that they have noincome or credit history# card companies figure theyll geta $ob that can pay the bills. %arents dont have to cosign. !n fact, you might not even know your kids have cards.&ut if they overspend, the card companies hope theparents will come to the rescue and pay the bill. 'omefirms even ask for parental income on the students creditcard application.

!t pays students who use credit responsibly to get astudent card. (heyll never get such easy credit again.&ut some students get so far into debt that they ruin theircredit rating before they graduate. (wo out of threeundergraduates have at least one credit card and )*+ ofthem have four or more cards according to a recent studyby a national educational loan provider. (he averagecredit card balance for undergraduates is -,*/.

!f your child gets a card, make sure he or she understandsthe significance of a clean credit history. Also e0plain whyits important to pay more than the minimum every month. (he student who racks up a -,111 creditcard bill in thefreshman year and pays only the low minimum eachmonth will finish a bachelors degree, a masters program,and still need three and a half years to pay off thatfreshman spending spree.

Credit card applications have been invading the mailbo0esof high school students too.

HO TO HELP PREPARE A CHILD FORCREDIT RESPONSIBILIT"

Help teens set up a budget, open a checking account,and decide if or how credit cards can be used duringyoung adult years.

Consider various credit companies before acquiring acard. 2ead the contract carefully and talk with teensabout terms and conditions found in the small print.

'how teens what happens to a balance if only theminimum amount is paid monthly.

Help them figure out how long it will take to repay theloan and what the actual cost of the item will be after allcredit charges have been added.

30plain that if he4she pays late or less than theminimum, he4she can be penali5ed with fees up to 71per infraction8 and a higher interest rate. 9iscuss whatmay happen when dealing with collection agencies.

:eep a college students credit limit low, ;11 to-,111, and instruct him4her to use the card only foremergencies. 'pell out what is4is not "an emergency. " 30plain what the term "good credit rating" means,what it is used for, and why i t is important to maintain onein todays economy. 9iscuss the consequences of a badcredit rating.

Consider having the bills sent to your address so youcan see they are paid on time.

(ell your child to keep the card in a safe and secretplace and to notify the card issuer immediately if it is lostor stolen.

2ecommend that students who choose to use creditcards limit themselves to one card and pay off the balancein full each month.

IF TEEN IS ALREAD" IN TROUBLE

!f your child is already in trouble, dont delay actionor help negotiating, call the nonprofit

organi5ation< Consumer Credit Counseling 'ervices at -117CCC' or visit 9ebt Counselors of Americas website at www. dca. org .

Consider a debt consolidation loan only if it will lower theinterest rate, not $ust the monthly payment.

Check your childs credit report a few weeks later. !f thereare negative remarks, send the credit bureau copies ofcorrespondence confirming your agreement.

P%ote&t "ou% C'ild() P%i*+&,$

Call -?666/76 for facts every concerned parentneeds to know about protecting their childs privacy.


18/28

(he !ndiana 9epartment of >inancial !nstitutions, 9ivisionof Consumer Credit has many other credit relatedbrochures available, such asivorce$redit and 2lder $onsumers>eep in >ebt%Equal $redit 2pportunity+air $redit eporting+air >ebt $ollectionIold $ards0ang up on +raud0igh ate !ortgages0ome Equity $redit *ines0ow to 'void &ankruptcy(ndiana Hniform $onsumer $redit $ode*ook &efore you *ease!ortgage *oansepossessioneverse !ortgage *oansule of BCs N 6hat is it%Scoring for $reditShopping for $reditHsing $redit $ardsMariable ate $redit

6hat is a &udget%6hat is the >+(%

Call our tollfree number or write to the address on thecover for a copy of any of the brochures listed or forfurther consumer credit information.

C6--SI*0

C8(DIT

C8D



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21/28

:& got a call fro) a wo)an who said &need credit card loss #rotectioninsurance5 & thought there was a lawthat li)ited )- liailit- to ;


22/28

The (ndiana >epartment of +inancial(nstitutions, >ivision of $onsumer $redit hasmany other credit related brochures available,such as:

'nswers to $redit -roblems'pplying for $redit't 0ome Shopping ights&ankruptcy +acts&uried in >ebt

$ar +inancing Scams$harge $ard +raud$hoosing ' $redit $ard$o"Signing$redit and >ivorce$redit and 2lder $onsumers>eep in >ebt%Equal $redit 2pportunity+air $redit eporting+air >ebt $ollectionIold $ards0ang up on +raud0igh ate !ortgages

0ome Equity $redit *ines0ow to 'void &ankruptcy(ndiana Hniform $onsumer $redit $ode*ook &efore you *ease!ortgage *oansepossessioneverse !ortgage *oansule of BCs N 6hat is it%Scoring for $reditShopping for $reditHsing $redit $ardsMariable ate $redit6hat is a &udget%6hat is the >+(%

$all our toll"free number or write to the address onthe cover for a copy of any of the brochures listed orfor further consumer credit information.

CREDIT CARDLOSS

PROTECTIONOFFERS

Don7t 6u, t'e

Pit&'8

D()8T3(*T -F FI**CI, I*STIT9TI-*S

$onsumer $redit >ivision;= South !eridian Street, Suite ;==

(ndianapolis, (ndiana ?A3=?;)B"3;3";@@, )"C==";C3"?CC=


23/28

Most credit cards

are unsecured.

However, there are

three ways in which

some credit card

lenders take collateral.

91 SECURIT"INTEREST IN ITEMSPURCHASED

Some credit card lenders, usually storecredit such as Sears, claim to takecollateral in items purchased with their card. This means that if you have problemsmaking payments, those lenders maythreaten to repossess property bought withthe card. (n addition, personal propertycollateral may affect your rights if you laterneed to file bankruptcy.

!ost threats to repossess personalproperty are not carried out.Fevertheless, it is a good idea to knowwhether the security interest eists. (f itdoes, use another card in preference to thatcard whenever possible.


24/28






CREDIT CARDS

THAT TA-ESECURIT"

INTERESTS

D()8T3(*T -F FI**CI, I*STIT9TI-*S

$onsumer $redit >ivision;= South !eridian Street, Suite ;==

(ndianapolis, (ndiana ?A3=?;)B"3;3";@@, )"C==";C3"?CC=


25/28

FST FCTS 'ign your new cards as soon as they arrive.

Avoid signing a blank receipt, whenever possible. 9raw aline through blank spaces above the total when you signcard receipts.

'ave your card receipts to compare with your billingstatements.

Bpen billing statements promptly and reconcile your cardaccounts each month, $ust as you would your checkingaccount.

2eport promptly and in writing any questionable charges tothe card issuer.

Dever lend your card4s to anyone.

Dever give your number over the phone unless you areinitiating a transaction with a company you know is

reputable.

Everyone pays for credit and charge card fraud in higher prices,whether or not they are personally defrauded.

Ihile theft is the most obvious form of credit and charge cardfraud, fraud occurs in other ways, as well. >or e0ample,someone may use your card number not the card itself8 withoutyour permission. (his may occur in a variety of waysivorce$redit and 2lder $onsumers

>eep in >ebt%Equal $redit 2pportunity+air $redit eporting+air >ebt $ollectionIold $ards0ang up on +raud0igh ate !ortgages0ome Equity $redit *ines0ow to 'void &ankruptcy(ndiana Hniform $onsumer $redit $ode*ook &efore you *ease!ortgage *oansepossessioneverse !ortgage *oansule of BCs N 6hat is it%

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Call our tollfree number or write to the address on the cover for a copyof any of the brochures listed or for further consumer credit information.

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FAST FACTS

6hen you use a credit or charge card to check into a hotel or rent a car, the estimated

amount of the transaction usually is 5blocked5from your credit line immediately.

6hen renting hotel rooms or cars, ask clerkshow much is being blocked on your credit card

to avoid potential problems.

(n some cases, the amount blocked from yourcredit line may remain for )= to )@ days.

(f you choose to pay your bill with the originalcredit card, the block is usually removed withina day or two.

6hen selecting a credit card, ask the cardissuer how long credit lines are blocked forthese transactions

(f you pay your bill with a different credit cardor cash, ask the clerk to release the block.

.

0ave you ever presented your credit or charge cardto a store clerk and been surprised when told youwere over your credit limit% (f this happened soonafter you stayed at a hotel or motel or rented a car,the problem may have been caused by credit card5blocking. 5

HO CREDIT CARD BLOC-ING OR-S

6hen you use a credit or charge card to check intoa hotel or motel or to rent a car, the clerk usuallycontacts your card issuer electronically with theestimated cost. (f the card issuer approves thetransaction, your available line of credit is reducedby this amount. This is called a 5block5 9or5authoriJation5.

+or eample, suppose you use a credit card tocheck into a D)=="a"night hotel for five nights. 't

least D@== would most likely be blocked on thatcard.

(n addition, hotel and car rental companiessometimes add anticipated 5incidental5 costs forsuch things as food, beverages, or gasoline. Theseamounts can vary widely among merchants.

(f you pay your bill with the same credit card youused at the beginning of the transaction, the finalactual charge probably will replace the block within aday or two.

(f, however, you use a different credit card, cash, ora check to pay for these services, the company thatissued the credit card you originally presented mightkeep the block on for as long as )@ days after you1vechecked out of the hotel or returned the car.

This delay occurs because the first card issuer doesnot receive notice of the final charge and, therefore,is not aware that the transaction has beencompleted. !ost card issuers program theircomputers to retain all blocks that have not beenreplaced by final charges for a specific number ofdays.

(ssuers often choose a )= or )@"day period becauseit is longer than most hotel stays and car rentals.0olding blocks for this long ensures that cardholders do not use their entire credit limit beforechecking out of the hotel or returning their rental car,leaving the hotel or rental car company unpaid. Thenumber of days that blocks are retained varieswidely among card issuers.

H" CREDIT CARD BLOC-ING CAN BE A PROBLEM

$onsumers who are far below their credit limitprobably will not be affected by credit card blocking.&ut for consumers with charges close to their creditlimit, credit card blocking can present problems. +oreample, consumers who need to use their cards foremergencies may find that, because of thistemporary block, they have no credit left to use.

Those consumers who pay for their room or rentalcar with cash, a check, or a different credit card alsomay have problems. They may find that they do nothave access to the amount of the block for )= or )@days, even though they already have paid the bill infull.

HO TO PROTECT "OURSELF

(f you do not want the aggravation that blocking cancause, you may want to:

$onsider paying for all hotel, motel, or rental carepenses with the same credit card you used atthe beginning of the transaction.

6hen you check into a hotel or pick up a rentalcar, ask clerks how much is being blocked onyour credit line and how that amount wasdetermined.

(f you pay with a different credit card or cash,ask the clerk to remove the block.

(n addition, when selecting among credit cards, askcredit card issuers how long credit lines are blockedfor transactions involving hotels, motels, and rentalcars. 4ou may wish to choose an issuer thatremoves blocks more quickly.

FOR MORE INFORMATION

(f you have questions or concerns about credit card

blocking, write: $redit $ard &locking,$orrespondence &ranch, +ederal Trade$ommission, 6ashington, >$ 3=@C=. Thesecomments help the +T$ in its law enforcementefforts.


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CREDIT

CARDBLOC-ING

>E-'T!EFT 2+ +(F'F$('* (FST(THT(2FS$onsumer $redit >ivision


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