Credit Cards

Your Credit Rights

Never borrow more than 15% of your yearly net income.
Example:
If you earn $1,500 a month after taxes, then your yearly net income is:
12 x $1,500 = $18,000.

Calculate 15% of your annual net income to find your safe debt load:
$18,000 x 15% = $2,700.

So, you should never have more than $2,700 of debt outstanding.

Note: Housing debt should not be counted as part of the 15%.

Monthly payments shouldn't exceed 10% of your monthly net income
Example:
If your take-home pay is $1,500 a month: $1,500 x 10% = $150. Your total monthly debt payments shouldn't total more than $150 per month.

Comparing Credit Cards

Cost of Credit

• Annual fees
• Annual Percentage Rate (APR)
• Finance charge computation
• Grace period
• Know the penalties for missed payments
• Transaction fees

Credit Card Questions

• What would be your credit limit?
• How widely the card is accepted?
• What services are available?

Credit Card Stats

• Total credit card debt in the U.S. now is a record $700 billion and counting. Source: CardTrak Online
• The average American household has 13 to 14 cards including bank cards, travel and entertainment cards, department store cards, gasoline cards, and debit cards. They add up to 1.4 billion pieces of plastic scattered throughout the land.
• The Federal Reserve's Survey of Consumer Finance found the largest expansion of consumer credit has been among the poor. Debt is falling for families with incomes above $50,000 and rising for families with incomes below $10,000.
• An increase in outstanding consumer debt, particularly credit card debt, has been cited as a significant contributor to the increased rate of bankruptcy filings. Source: Federal Deposit Insurance Corporation (FDIC)
• Many families will pay almost the same amount in interest on credit cards as they spend for food this year.