Written credit card applications are required You must request the application.

The Credit Card Act of 2010 limits teenagers ability to get credit cards and may slow the rate of college credit card debt and allow students to enter the real world with fewer financial obligations. Here are some key points to the law: Written credit card applications are required You must request the application. Credit card awards What are awards? Award programs give you points, miles, or dollars every time you use the card. These programs can encourage excessive or improper use of credit cards. For young adults, the best award programs are those that pay cash back based on credit card purchases. Bottom line When the credit card balance is paid each month, award programs can provide useful benefits. Teens must prove income or have a co-signer. Problem: Should you be a co-signer if your friend, roommate, or the love-of-your-life really wants a jet ski? His or her credit is horrible, but yours is not. Answer: Use the Tattoo Rule. If you would not tattoo that person s name on your arm, don t co-sign the loan. Both last about as long and are equally painful to get rid of! If you co-sign for a friend, you could be 100 percent on the hook for the balance due even if your friend had promised to make all the payments. He or she could break up with you and leave town with the jet ski! Colleges cannot market credit cards on campus. What are credit card teasers? Teasers are very low rates that get your attention. Teasers often only last a few months, and then the rate may go much higher. Teaser rates may be lost if a single payment is late. Bottom line A teaser may be a good deal if you are disciplined. Know the terms before signing up! 19

Think in terms of total purchase price, not the amount of monthly payments. Buy a used car if you can t afford a new car. Don t be afraid to negotiate with the salesperson to get a better deal. Shop around before buying. Check out car values online (e.g., Kelley Blue Book [www.kbb.com] or www.edmunds.com/tco for True Cost to Own. Make a down payment of at least 20 percent of the car price. Take out the shortest loan plan you can afford. The longer you make payments, the more you will pay for interest on the car loan. Don t take out a loan for longer than you intend to keep the car. Spend no more than 20 percent of your available income on car payments. Make extra payments on your loan whenever you can. Consider selling your used car yourself. You may come up better than selling it to a car dealer. OOPS! I m Upside Down! Upside-down loans are loans where the amount borrowed is greater than the value of the car purchased. Think: I owe $3,000 in car payments, but I could only get $2,000 for the car if I sell it. Unless a substantial down payment is made, the car loan will be upside down from day one. The average car loses about 25 percent of its value in the first year. Think: Wow! I just pulled out of the car lot, and my car is worth less than I paid for it! 20

Payday Loans (a.k.a. Paycheck Advance) Getting money when you don t have money and owing more money than the money you will get. Make sense? A small, short-term loan that is intended to cover a borrower s expenses until his or her next payday. This fast and easy solution is a way to avoid bounced check fees and later payment fees. Sound good? Payday loan fees average $25 to $30 for $100 borrowed, which is expensive and may be habit-forming. What You Need to Know About Payday Loans You must show proof of employment and bring a bank statement. You could pay up to $20 to borrow $100 for two weeks. You write a check to the payday lender for the amount you want to borrow plus lender fees. When rollover fees are added to borrowing the $100 every two weeks, it becomes an annual interest rate of 800 percent. You can get in trouble writing a check for an amount of money you don t have in your checking account. The payment of rollover fees makes repaying the loan more difficult. People borrow money from payday lenders until their next paycheck, usually two weeks. If you can t repay your loan when it s due, you can roll it over so that the loan is extended, and fees keep accumulating. The poorest people are targeted for this type of loan. Payday loans won t help you solve your real money problem. Payday lenders defend their practice as an alternative for quick money for people in need. 21

Rent-To-Own (RTO) Contracts RTOs are marketed as a risk-free way to acquire furniture and appliances. Because RTOs are not styled as loans, average percentage rates (APRs) are not disclosed. The average imputed APR is 100 percent, based on the sales price offered by the RTO stores. When department store prices are used, the imputed APR can increase to 200 percent or more. The total cash outlay required to purchase an item from an RTO store is two to five times the cash price at a department store. Many items are not clearly distinguished as new or used. RTO Store Dept. Store Difference Average cash price for 19 color TV $415.14 $217.74 1.9 x higher Total average RTO payments for 19 color TV $746.71 $217.74 3.4 x higher Average cash price for 19 RCA color TV $451.92 $221.79 2.0 x higher Total average RTO payments for 19 RCA color TV $801.00 $221.79 3.6 x higher Average cash price for 14 cf refrigerator $734.73 $516.99 1.4 x higher $1,320.78 $516.99 2.5 x higher Total average RTO payments for 14 cf refrigerator Don t rent to own! The lesson is clear: Save your money until you can afford to pay cash. At the end of 18 months, you will have your furniture and appliances and much more money. The only good thing about RTO contracts is that the consumer does have the option to cancel the lease and return the goods and isn t obligated to pay the purchase price. 22

Hacking Online Fraud Identity Theft True Stor y Twenty -five pe rcent of victims identity are 18 theft to 29 y ears old. Be cautious! Phishing You get a phony e-mail that appears to be from your bank or an online service instructing you to click on a link and provide information to verify your bank account. Pharming/Spoofing Hackers redirect a legitimate Web site s traffic to an imposter site, where you will be asked to provide confidential information. Hacking Criminals can steal credit card numbers, bank account information, and passwords that you provide to make online purchases. Spyware You may have unknowingly downloaded illicit software when you opened an attachment, clicked on a pop-up, or downloaded a song or game. This type of spying allows criminals access to confidential information on your hard drive. 23

of College You want to get as much money as you can in grants, scholarships, and work-study so that you can borrow less. Colleges must give information on all student aid available so you will be able to determine the actual costs of attending college. Check out the Net Price Calculator at www.gotocollege.ky.gov for facts on any Kentucky college you may be considering. Where does college money typically come from? Grants Awards that generally don t have to be repaid and are usually based on financial need. Pell grants are capped at $5,500 per year. Eligibility is determined from a Free Application for Federal Student Aid (FAFSA) form. Scholarships Awards that generally don t have to be repaid and are usually based on skill, ability, talent, or achievement. On average, scholarships cover 22 percent of public school costs and 34 percent of a two-year public college. Loans to students Money borrowed through federal programs must be repaid with interest. Student loans are debt, not exactly financial aid. An education is a good thing, but student debt is off the charts. Interest rates on college tuition loans are high and fixed. The loans can t be refinanced, meaning they can be a trap that s hard to escape. New! The Kentucky Advantage Education Loan (1-800-988-6333 or www.advantageeducationloan.com) is an option if you need additional money for college. It offers a fixed interest rate based on the repayment plan you choose. 24

Students were asked how they would get through four years of college without going broke. Their suggestions include: Saving money while in high school. Choosing a college or university you can afford. Taking the time to create a realistic budget, and then sticking to it. Not eating out too much and using the dining hall more often. Not partying too much. Working on campus and at home on breaks. Keeping grades up to maintain scholarships. Taking advantage of schoolsponsored entertainment. Buying used books instead of new. Beware of: Lending money to friends. Picking up the tab for everyone when eating out. Making reservations for an expensive Spring Break trip. Buying too many college-logo items. Trying to keep up with friends spending. 25

Now I Get It, I THINK Credit is a basic financial tool. Credit bureaus keep records of my repayment history. Borrowing money to buy something usually costs more than paying cash because of the fee for credit (interest). Responsible borrowers repay as promised. Comparing the costs and benefits of using credit is key to making a good decision. A longer loan period and smaller monthly payments mean a higher credit cost. Negative information in your credit report can affect your financial future. 26 Understanding credit card information is key to controlling borrowing costs.

Talk to Parents 60% of teens say they have NEVER had a meaningful discussion about finances with their families.? u o y ave H We encourag to take this be you home tonight ooklet. When Wha family m today t did you embers a Talk? show learn in sk, s t abou t wh hem this chool at yo Ask qu u lea booklet. estion rned s.. You can then be a part of the elite 40% of teens who have meaningful conversations with their family about money management and credit. 27

Glossary of Terms Annual Percentage Rate (APR): The finance charge or total amount it costs per year to use credit, calculated as a percentage of the amount borrowed (percentage rate), including interest, transaction fees, and service charges. ATM card: Access to the Automated Teller Machine provided by banks for 24/7 cash withdrawals. Budget: Plan for managing money, dividing up expected income and expenses among spending and saving options based on personal goals during a given time period. Check: Written order directing a bank or credit union to pay a person or business a specific sum of money. Contract: Legally enforceable written or oral agreement between two or more parties to do or not do something. Credit: Amount of money a creditor is willing to loan another to purchase goods and services, based on trust and the expectation that the money will be repaid as promised with interest. Credit card: Card that enables holder to charge expenses for purchases or to get money, often with interest. Credit rating/score: Measure of creditworthiness based on an analysis of one s financial history. Debit card: Card used to pay for goods and services directly from a checking account by transferring funds electronically from one s checking account to the store s account to pay for a purchase. Debt: Entire amount of money owed to lenders. Financial plan, financial planning: Ongoing thinking process to develop an orderly program or blueprint for handling all aspects of one s money, including spending, credit, saving, and investing. Hacking: Modifying computer hardware and software to accomplish a goal outside of the creator s original purpose. Identity theft: Someone pretends to be someone else by assuming that person s identity, usually as a method to gain access to resources or obtain credit and other benefits in that person s name. Impulse purchase: Purchase made on a whim, without using a decision-making process. Income: Any money an individual receives. Interest: Payment for the use of someone else s money; usually expressed as an annual rate in terms of a percent of the principal (the amount owed). Needs: Essentials or basics necessary for maintaining physical life, including food, clothing, water, and shelter, sometimes called material well-being. 28 Pay Yourself First (PYF): Disciplined saving or setting aside money as a regular part of the budget for later spending or investing. Wants: Items that a person would like to have but are not essential for life. Items, activities, or services that may increase the quality of life, but one can live without them.

30768 Curriculum Management CARE Book 1/15 rj