College students often make financial decisions that can have consequences for years. Getting a student loan or credit cards can influence long-term financial success. Here are the ways to strengthen your decision-making skills:
- Do your research before applying for a student loan. If you have to borrow to pay for some or all of a college education, review the different types of student loans. Choose one that’s low-cost and has a flexible repayment terms, which will generally be a federal student loan.
- Understand the pros, cons and costs of debit and prepaid cards. Debit cards enable you to withdraw money from your checking accounts for purchases or cash. Prepaid cards are used to access money that has been loaded (added) onto the card, which is not connected to a bank account.
- Use credit cards responsibly: While credit cards are a convenient way to establish a credit history, they can make it easier to spend money. Purchases that cannot be paid in full by the due date will incur interest
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- Ask students if they have an outstanding student loan. Was the process of financing an education daunting and time consuming?
- Ask students to visit the College Affordability and Transparency Center website (collegecost.ed.gov) for choosing the financial aid package that best suits their needs.
- Why is it important that you find the most affordable education that fits your budget, future career, and long-term financial goals?
- What might be the benefits of understanding the pros, cons, and costs of debit and prepaid cards?
- Are school-affiliated cards the best deal for all students? Why or why not?
If you find an error in a report from a credit reporting agency, you may submit a dispute not only to the credit reporting agency, but also directly to the company that is the source of the information. If the company corrects your information as a result of your dispute, it must notify all of the credit reporting agencies to which it provided the inaccurate information, so they can update their reports with the correct information.
If you submit a dispute by mail, your dispute letter should include your complete name, address, telephone number, your confirmation number (if available), and the account number. Clearly identify each mistake, state the facts, explain why you are disputing the information, and request that it be removed or corrected.
You may want to enclose a copy of the portion of your credit report that contains the disputed items and circle or highlight the disputed items. You should include copies (not originals) of documents that support your position. Send your letter by certified mail and ask for a return receipt, so that you will have a record that you letter was received.
For more information, click here.
- Ask students to request their own credit report and check for any errors.
- Ask students to draft a letter of complaint if they find any errors in their credit report.
- Where else can consumers submit a credit reporting complaint?
- If you suspect that error in your credit report as a result of an identity theft, what steps can you take to protect yourself?
Pension advance lenders offer retirees and veterans a loan or cash advances in exchange for all or part of their pension payments. Paying back the advance or loan, plus the high interest and fees that such loans typically include, could threaten older Americans’ retirement security.
If you are considering a pension advance, follow these do’s and don’ts:
- If you are asked to sign up for life insurance with the pension advance, you could end up paying the insurance premium.
- If you are resorting to pension advances due to financial difficulties, consider getting financial coaching or counseling from a professional.
- Don’t be fooled by patriotic-sounding names, logos, or claims of government backing.
- Don’t give anyone access or control over your monthly pension payments.
For additional information, and learn more, click here.
- Ask students to research local non-profit credit counseling agencies and what services they provide.
- Why is it important not to give anyone access or control over your monthly pension payment?
- Why do people resort to pension advance loans?
- What are other alternatives to pension advance loans?
- What recommendation should you take to protect your retirement pension when considering an advance?
Have you seen a sign offering a car title loan—also known as a pink-slip loan, title pledge or title pawn? These loans are use your paid-off car as collateral, and you get a small, short-term loan with a high interest rate. You usually have to repay the loan in 15 or 30 days, and the annual percentage rate (APR) is often more than 100 percent. If you don’t pay back the loan, the company can repossess your car—and then you’re worse off than you were before. It’s a very expensive way to get money.
Before you decide to take out a car title loan, weigh some options.
- Can you get a small loan from your bank, credit union or a small loan company? Even a cash advance on a credit card might cost less than a car title loan.
- Shop for the offer with the lowest cost. Compare the APR and the finance charges, and borrow only what you can repay in time.
For additional information, click here.
- Ask students how they can avoid costly loans like car title loans?
- Why car title loans are considered risky and undesirable?
- What can consumers do if car title lenders fail to disclose all the qualifying terms associated with obtaining a loan at its advertised rate?
- What can government agencies do to protect consumers in the short-term lending and auto marketplaces?
Most people know they can refinance a mortgage—that is, replace an existing loan with a new one that may offer better terms. But did you know you can also refinance personal loans, including auto loans, credit cards and student loans?
“Refinancing a personal loan may save you money, especially if you get a lower interest rate, a lower monthly payment or other benefits,” notes Susan Boenau, Chief of the FDIC’s Consumer Affairs Section. “However, refinancing does not always equate to saving money or better terms.”
Understand potential pitfalls in refinancing a personal loan. For example:
- You may have a higher APR than what you were originally paying when the promotional rate ends.
- Closing a credit card account also reduces your available credit and may adversely affect your credit score.
- A balance transfer may result in your account having multiple interest rates.
- You may be assessed a prepayment penalty if you refinance a loan before it matures.
- If your credit score is low, wait to refinance until you can raise it.
For more information, click here.
- Ask students to prepare a list of similarities and differences between a home equity loan and refinancing personal loans.
- Ask students to use the Internet to obtain information about refinancing.
- What are the possible advantages and disadvantages of refinancing?
- What are your legal remedies if a credit reporting agency engages in unfair reporting practices?
When your credit card issuer suspects fraudulent activity on your credit card, it triggers a red flag to deny the charge. Generally, it is a great protection. But if you are making the purchase and not a thief, it can be frustrating. Some purchase patterns that could cause your purchase to be denied include:
- A purchase for a small dollar amount, followed by a large purchase. Credit card thieves sometimes make a small dollar “test purchase” followed by big ticket items, so this raises a red flag.
- Multiple purchases back-to-back in a short span of time.
- Making purchases in a new city, in a different part of town, or in stores where you do not normally shop.
Though inconvenient, these protections are to keep you from being a victim of fraud. Take these steps to prevent or deal with a credit card purchase being denied by mistake:
- Inform your credit card company if you will be using your card out of town (especially internationally).
- Update your billing address if you move, so that the company recognizes the new pattern of purchases as a new normal.
- Make sure the company has your cell phone number so that it can contact you faster to verify or authorize a purchase.
- Contact your credit company immediately if your purchase is denied.
For more information go to http://www.usa.gov/topics/consumer/consumer-action-handbook.pdf
- Ask students if their credit card was ever denied in error.
- If the transaction was denied, how did they resolve the problem.
- What are a few reasons that your credit card purchase might be denied?
- What can you do to avoid such an embarrassment at the check-out counter?
You just opened your credit card statement. “What’s this charge?” may be your first thought when you see a small charge on your credit card statement that you can’t figure out. This is known as a “grey charge” and there are several types of grey charges you should be familiar with:
- Unintended subscriptions. You thought you made a onetime purchase, but it was really a subscription.
- Zombie fees. Membership fees that you had cancelled, but charges still appear on your statement.
- Free trial to a paid subscription. When a free trial is over, the seller converts it to a paid subscription.
- Negative option. You bought one product, but did not realize that you were buying others at the same time.
What can you do to protect yourself from grey charges?
- Before you buy, read the terms of service. Disclosures about fees may be hidden, so read the entire document.
- Mark your calendar as a reminder to cancel free trials by a set date.
- Read your credit card statements carefully. Pay attention to the names of companies and charges for small amounts.
- Contact the seller to have the grey charges removed.
- Dispute the charges with your credit card company.
For additional information on grey charges go to: http://www.consumer.ftc.gov
- Have students check their credit card statements to discover any grey charges.
- Have students make a short presentation with a summary of actions that might be taken to avoid grey charges.
1. What are several reasons to check your credit card statements?
2. What can you do if grey charges appear on your credit card statement?