Published on December 25, 2007
Credit Cards: Friend or Foe?: Credit Cards: Friend or Foe? University of Nebraska Cooperative Extension Community Lesson Credit Card Concerns: Credit Card Concerns Senior citizens are slowly drowning in debt 53.8% of senior households carry some debt Half of those households are over $20,000 in debt Debt is up 164% since 1992 Seniors are not living extravagantly, but their expenses are rising at double-digit rates Seniors Turning to Credit Cards: Seniors Turning to Credit Cards Seniors are turning to credit cards to cover rising costs Retirees ages 55 to 64 average $6,900 in credit card debt Americans over 65 aren’t in as much debt, but at least half carry a debt of $2,000 or more Stolen Identity or Lost Credit Cards : Stolen Identity or Lost Credit Cards A lost or stolen credit card, or worse – having one’s identity stolen, can cause financial woes Emotional stress caused by these challenges can be very overwhelming Goals and Objectives: Goals and Objectives “Credit Cards: Friend or Foe?” is designed to help participants develop techniques to: limit credit card debt limit fees paid to credit card companies, protect personal identity. Discussion Questions: Discussion Questions Share experiences of a credit card challenge or identity theft. Why is the management of credit cards important to people our age? What concerns you about having and using a credit card? Rules for Discussing Financial Matters: Rules for Discussing Financial Matters Encourage and respect everyone’s participation. Personal examples shared during the presentation are not to be shared with others. Affirm an individual’s choice about owning and using a credit card. Rules for Discussing Financial Matters: Rules for Discussing Financial Matters Encourage you to share the educational components of the presentation with others. Seek help if you are at financial risk. Help is available from professionals and family. Group Scenarios: Group Scenarios Divide participants into four groups. Have each group discuss a different scenario and questions. Have each review their scenario and report their thoughts to the entire group. Esther’s “Wants” vs. “Needs”: Esther’s “Wants” vs. “Needs” What are Esther’s “needs”? What are Esther’s “wants”? What does Esther think are her “needs” and “wants”? Ester’s “Wants” vs. “Needs”: Ester’s “Wants” vs. “Needs” How could Esther have avoided the problem of not having enough to pay her electric bill? Do you think filing out a credit card application for $1000 of instant credit is the right thing for Esther to do? Would Esther be wise to explore other living arrangements? If so what should she consider? Selecting and Using a Credit Card: Selecting and Using a Credit Card Recommend that your payment is sent 7 to 10 days before the due date. Electronic payment should be made 2 to 3 days before the due date to ensure payment being credited to the account and no late fees charged. Review details of cash advance fees. Interest may be charged as well as a fee (check minimum fee) for the cash advance transaction. Credit Card Wrap: Credit Card Wrap Make a credit card wrap by cutting a recipe card to wrap around your credit card. Record each purchase or cash advance to the credit card, just as you would a check in a check register. Keep a running balance of what is charged on your credit card each month. Do not over spend your limit/budget. Check your record against your statement. Selecting and Using a Credit Card: Selecting and Using a Credit Card Shop for a credit card. Study all the details of the application before signing. Note fees charged including annual fee. Understand the details of the introductory offers and how long they last. Know what constitutes a late payment and the amount of penalties charged. Credit card bills are not considered paid until the company receives and credits payment to your account. Jones’ Credit Card Bill: Jones’ Credit Card Bill What Stan and Alice expected . . . Un-paid balance on prescriptions $280.00 Cash Advance $ 50.00 Interest on balance due $ 0.00 (at introductory 0% APR) November Balance Due $330.00 Jones’ Credit Card Bill: Jones’ Credit Card Bill What Stan and Alice were billed! Balance carried over from September $280.00 October late fee $ 19.00 Interest on un-paid balance $ 3.98 Cash Advance $ 50.00 Cash Advance fee (minimum $5.00) $ 5.00 Cash Advance interest $ 1.40 (15.99% based on 12 days) November Balance Due $359.38 Tips for Seniors in Debt: Tips for Seniors in Debt Studies show that older Americans have a higher debt load than in the past This is due to rise in health care costs and decline in pensions and drop in retirement income Many senior citizens find themselves victim to fraud, scams and identity theft Tips for Seniors in Debt: Tips for Seniors in Debt Do not be afraid to seek guidance. Talk to a banker or financial advisor first. Family members can also be of help. Put aside any needless guilt or shame. If a spouse previously took care of finances, it does not relieve you of being responsible now. Make a monthly budget and determine if you can meet your obligations. Tips for Seniors in Debt: Tips for Seniors in Debt Prioritize your bills. When income is limited always pay your mortgage/housing first, car second, and don’t let your health insurance lapse. Unsecured debt, such as credit cards can be negotiated. Know who your creditors are. The more that you know about whom you owe, the less likely you will be to become a victim of scam. Do not let collectors pressure you into a bad decision. Tips for Seniors in Debt: Tips for Seniors in Debt Consider a part-time job if possible to help you catch up on bill payments. Cut expenses to a minimum where possible, but do not jeopardize your health. Ideally retire without a mortgage. Move to a smaller housing option. Do not open additional credit lines or use “convenience checks” to pay off debt. Tips for Seniors in Debt: Tips for Seniors in Debt Do not cash out home equity lightly—if expenses are already tight, this could put your home at risk. Consider tapping your life insurance. Last option includes bankruptcy and not paying your bills. When you die, if you have assets, your creditors will be paid from your estate. If you jointly own assets with someone else, that asset may be taken to repay any debts. George Loses It?: George Loses It? What steps should George have taken in the first place to avoid having his identity “stolen”? What special precautions should be taken when using credit cards to protect one’s identity? What should George have done when he first noticed his credit cards were missing? Tips for Protecting Your Identity: Tips for Protecting Your Identity Try to maintain the greatest possible level of security over your private information. Do not give out financial information on the phone unless you made the call and know the person or organization being called. Store in a secured place, copies of all identity and fronts and backs of credit cards carried with you. Report missing items immediately. Call the Police—Identity Theft is a Crime. Tips for Protecting Your Identity: Tips for Protecting Your Identity Shred or tear all mailed credit or other solicitations, bank records or any other discarded documents that may provide personal information. Know due dates for bills. If you do not receive them on time, contact the company. To limit number of pre-approved credit card offers call 1-888-567-8688. See Participant Manual for additional ways to limit offers that you receive. Tips for Protecting Your Identity: Tips for Protecting Your Identity Periodically request a copy of your credit report. Do not put your Social Security number on your driver’s license or print on your checks. Do not carry your Social Security Card in your billfold. Store new and cancelled checks in a safe place. Report lost/stolen checks to your bank immediately, and carefully review every statement. Guard Against the Gambling Trap: Guard Against the Gambling Trap Older citizens are targeted by the gaming industry as they have time available and accumulated wealth. Casinos offer a safe environment, low-cost food, social activity, entertainment and in some cases transportation. Guard Against the Gambling Trap: Guard Against the Gambling Trap To protect yourself from the risk of becoming a compulsive gambler, set personal guidelines that will help you keep gambling activity truly a form of entertainment. Guard Against the Gambling Trap: Guard Against the Gambling Trap No one should feel pressured to gamble. Set limits to play– both time limit and a limit to the amount that you are willing to lose. Be aware that you will lose more often than you will win. Money spent gambling should be considered a cost of entertainment. Guard Against the Gambling Trap: Guard Against the Gambling Trap Money to provide for basic needs, such as food, clothing, medication, and shelter should not be used for gambling. Do not rely on gambling to cover the cost of basic needs. Borrowing money from any source, including credit card cash advances, pawning personal belongings or writing bad checks is risky behavior. Guard Against the Gambling Trap: Guard Against the Gambling Trap Do not gamble when you are feeling lonely, depressed or angry, or when you are under a great deal of stress. Bright lights, crowds of people and excitement of the casino can have a hypnotic effect. Drinking alcohol or using drugs while gambling is risky because it can interfere with your ability to control gambling and stick to your limits. Lou “Maxes Out”: Lou “Maxes Out” Credit Cards: Friend or Foe?: Credit Cards: Friend or Foe? 53.8% of senior households carry some debt. Half of those households are $20,000 in debt. Practice what you have learned today on managing your financial affairs, credit card and protecting your identity. Do not become one of the statistics! References: References “American Seniors Rack Up Debt Like Never Before”, Seniors USA, (http://senrs.com/american_seniors_rack_up_like_never_before.html). Cantrell, Randy, Citing of the “2000 Census Figures” August , 2004 “Credit Prevention - Some Steps You can Take”, Legal Counsel for the Elderly, (http://www.uaelderlaw.org/id/C.html). “Greatest Generation in Debt”, (http//www.cbsnews.com/stories/2003/12/10/earlyshow/living/money/main587903.shtml) Schroeder, Debra and Rebecca Versch, “Protect Your Credit and Identity”, NebFacts, University of Nebraska Cooperative Extension, NF02-538 “Tips for Seniors in Debt”, Consumer Credit Counseling Service, (http://www.cccsatl.org/index.asp?_method=view&sc+125&cn+1734).