Tuesday, December 9, 2014

Welcome to the Real World, part 4

Credit card offers start filling the mailbox long before a student graduates college.

We discussed credit cards and how to use them this week.



While I believe in living debt-free, I am not a 'cash only, no credit cards ever' kind of person.

A credit card can be used wisely and to your advantage.

We defined and discussed in class many of the terms you will see on a credit card agreement:

Annual Fee
Annual Percentage Rate
Balance
Credit Line
Credit Rating
Grace Period
Introductory Rate
Minimum Payment
Overdraft Protection 

If you have a credit card with cash back or other perks and pay the balance in full every month, the card works to your advantage.

I gave an example of how much you would pay for something if you just paid the minimum balance on the card every month to demonstrate the pitfalls of credit.

We compared the advantages of using a credit card vs. a debit card.  I personally do not like to use a debit card because there is no disputing a charge (or the money is not available while you are disputing) or if you reserve a hotel with a debit card, the full charge is held on your account.

One way for a student to learn to use a credit card wisely is to put a small limit on the card.  Start with a $100 limit and learn to pay it off every time you use it. 

Even if a student never plans to use a credit card, it is a good idea to have one in case of emergencies.

After the credit card discussion, students were given a credit card comparison sheet that I found online.  The comparison sheet listed the name of the card, the APR, rewards, annual fee, and bonuses.

Students were required to compare cards and choose the one they thought would be best to use.  

During the week I looked at the students' job search information to award them a job.  Some students were able to find many job postings, but some did not find many at all.  This helped the class see how an in-demand degree helps in getting hired after college.

Marriage Lottery-4 more students were randomly matched this week to 'get married' and collaborate on their homework.

Homework for the week: Make a monthly budget using the provided budget sheet.  Using the internet, find housing that you can afford located in a place you would live.

For the budget, students had to assume that 25% of their paycheck went toward taxes and with holdings (welcome to the real world!).  I recommended that they budget 25% (or less) for rent.  Student loan payments had to be included in the budget as well as utilities, phone, gas/public transportation, food, etc.  'Couples' were required to budget together.  Newly formed couples had to decide who would move if they didn't have jobs in close proximity.

If you missed the previous posts in this series, you can find them here:
 Welcome to the Real World
Welcome to the Real World, part 2
Welcome to the Real World, part 3
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