Alex Jones Show - 19980101_PSA_Alex

00:00:00.000 Thank you.

00:00:29.000 I remember the first time I got a catalog in the mail.

00:00:51.000 I was so excited I didn't know what to do.

00:00:55.000 It was for one of those CD clubs, you know, the kind where you get 10 CDs all for the price of one and never have to buy anything again.

00:01:02.000 You can't imagine the joy I felt looking through all those colorful stamps, picking up the CDs I wanted, sticking them on the reply cards.

00:01:10.000 It was unbelievably hard to wait for my CDs to arrive.

00:01:14.000 But they did.

00:01:16.000 As the years went on, I built up quite a collection of CDs and other things I ordered through the mail.

00:01:21.000 Mom and Dad were really nice and would order for me using their credit cards.

00:01:25.000 Or sometimes I'd just give them the cash and they'd write a check.

00:01:28.000 Then one day, just for the fun of it, I sent in my own credit card application.

00:01:32.000 And guess what?

00:01:33.000 About a month later, My credit card arrived.

00:01:36.000 I couldn't wait to go to the mall and try it out.

00:01:38.000 The mall was like a giant candy store.

00:01:41.000 All I had to do was give them my card and I could have anything I wanted.

00:01:45.000 Until one day when I reached my limit.

00:01:48.000 I'm sorry miss, but your card has been rejected.

00:01:53.000 It was like a slap in the face.

00:01:55.000 I'm sorry miss, your card has been rejected.

00:01:58.000 What right did he have to say that to me?

00:02:00.000 How insulting!

00:02:01.000 But then the trouble was just beginning.

00:02:05.000 The bills started coming in and coming in and coming in.

00:02:09.000 It seemed like they would never stop.

00:02:12.000 Before I knew it, I was in way over my head and had to get some help.

00:02:17.000 Like many teenagers who are lured into trouble by the temptation of easy credit, Tina was naive about the responsibilities of personal finance.

00:02:26.000 Nothing can be more important to a person starting out in life than getting a proper understanding of how personal finances work.

00:02:33.000 Teenagers are notorious for giving in to their desires without thinking ahead to the consequences.

00:02:39.000 Before they know it, Teenagers can be in over their heads, owe more money than they can pay, and have to turn to parents, relatives, or outside credit counseling agencies for help.

00:02:51.000 But that doesn't have to happen to you.

00:02:53.000 You have a choice.

00:02:55.000 You can avoid financial trouble by applying the things we are going to tell you in this program to your own situation.

00:03:02.000 We always got everything we wanted, but at the end of the month, the bills would come in.

00:03:08.000 Mom and Dad would always argue.

00:03:12.000 Let's start by getting a good working definition of the key issue, money.

00:03:16.000 Money, simply told, is something generally accepted as a medium of exchange, a measure of value, a means of payment.

00:03:25.000 In ancient history, human beings traded among themselves using animal skins, bushels of corn, or strings of fish.

00:03:31.000 Goods were exchanged directly for goods.

00:03:34.000 But as civilization diversified, it became increasingly difficult to establish value between buyer and seller.

00:03:41.000 Were five goats equal to ten bushels of wheat?

00:03:44.000 What if the guy with the goats didn't want wheat, but wanted fish instead?

00:03:48.000 Or bricks?

00:03:48.000 Or lumber?

00:03:49.000 Or something the guy with the wheat didn't even have?

00:03:52.000 That was a real problem.

00:03:54.000 Then some enterprising individual came up with the idea of a medium of exchange that could be accepted by farmers and hunters alike.

00:04:02.000 Early money took the form of jewels or crude coins made of gold or silver.

00:04:07.000 As society evolved and became more sophisticated, governments took on their responsibility of establishing standard units of value and issuing currency backed by gold or silver in the nation's treasury.

00:04:19.000 In the modern world, we deal in coins and paper money or cash, but we also use financial vehicles offered by banks such as checks and credit cards to pay for goods and services.

00:04:31.000 This is where things begin to get a little sticky and where you need to start paying attention.

00:04:36.000 Financial institutions have had a long time to sharpen their skills at making money from unwary consumers.

00:04:43.000 Ever since I was a little girl, Mom would always take us to the mall.

00:04:47.000 She would always buy our stuff with credit cards.

00:04:49.000 There are a lot of features that need to be considered when it comes to credit cards, and you'll find them all in the very small print, the disclosure statement that oftentimes kids don't read, adults don't read it.

00:05:02.000 And so what ends up happening is you could buy a pizza for $10 on Friday night because you're starving.

00:05:09.000 It's a necessity.

00:05:10.000 And if you paid minimum payments, over time that pizza could end up costing you $100 or more. 0.99

00:05:17.000 What fool would pay $100 for a pizza? 0.98

00:05:21.000 It might be you if you don't know what you're doing with regard to your credit card. 0.99

00:05:25.000 Such things as late fees, over-limit fees, 22% interest and so forth can add up to a horrifying amount of money over time.

00:05:34.000 Not only do people tend to spend more money when they pay with credit, they often buy things they wouldn't buy if they had to pay cash.

00:05:43.000 Even things they don't really need.

00:05:45.000 Let us consider the disadvantages to using credit cards.

00:05:49.000 First of all, you commit future income or earnings to pay for something you will be using now.

00:05:55.000 This decreases your spending power for what you can buy later.

00:06:00.000 Secondly, buying on credit adds additional cost to items you purchase because you must pay finance charges that can run 22% or higher.

00:06:09.000 Third, unless you are a seasoned credit card user with decades of experience, chances are you will be lured by the false perception of getting something for nothing.

00:06:20.000 Fourth, if you misuse your credit card, spend beyond your limit, or don't pay on time, you will damage your credit record.

00:06:28.000 A poor credit rating can haunt you for years and prevent you from getting college loans, car loans, house loans, even other credit cards.

00:06:38.000 And fifth, credit cards can be lost, stolen, or misused by others.

00:06:43.000 This can lead to a host of problems with a credit card holder that can go on for years and could result in a lawsuit.

00:06:50.000 If they never seem to have any money and they end up using credit, or if they get behind on their bills and people are pestering them to pay, those are always red flags that they really need to cut back and live within their means a little bit more.

00:07:08.000 And if they are using credit, then they need to either cut up that card or put it in a glass of water and put it in the freezer until they can feel comfortable with it again.

00:07:19.000 However, there are many benefits of having good credit that result from using credit responsibly.

00:07:25.000 The first step is understanding what credit means.

00:07:29.000 Credit comes from the Latin word credo, meaning to believe or to trust.

00:07:34.000 Credit is a merchant's faith in your ability Later, to pay for goods or services he gives you today.

00:07:42.000 When someone, whether it's a big company or your mom, gives you credit, they are entrusting you with an obligation to repay.

00:07:50.000 If you are responsible and do what you say you are going to do, you will be given more credit.

00:07:56.000 If not, you'll lose the credit you have.

00:07:58.000 It's that simple.

00:07:59.000 It all comes down to you.

00:08:02.000 In order to use credit wisely, it's important for you to understand all kinds of credit accounts that are generally available to consumers.

00:08:10.000 Installment credit is primarily used to purchase large expensive items such as automobiles, major appliances, and furniture.

00:08:17.000 Installment credit breaks the total sales price, taxes, and interest down into a number of equal payments, usually on a monthly basis.

00:08:26.000 I always wanted a Jeep.

00:08:28.000 I had no credit so my parents had to co-sign for me.

00:08:31.000 Say you buy a used Jeep Cherokee for $10,000 and finance it over 36 months.

00:08:37.000 $10,000 divided by 36 equals a monthly payment of $277.77.

00:08:44.000 To that $10,000 you must add taxes and interest.

00:08:48.000 I thought by working after school I could afford $277 a month, but taxes and interest added over $50 to the payment.

00:08:57.000 If taxes are 8%, you add another $800 to the bill.

00:09:02.000 If interest is 12%, you add another $1,200, making your total sales price $12,000, and your monthly payment $333.33.

00:09:13.000 But that's not all.

00:09:15.000 Then the insurance bill came.

00:09:16.000 It was another $150 a month because I had some tickets.

00:09:20.000 Most dealers will want you to carry insurance with a comprehensive coverage that can add $100, $200 or more to your monthly expenses.

00:09:28.000 To operate a car, you must buy gas, oil, tires, and pay for periodic upkeep and maintenance.

00:09:34.000 The Jeep needed the tires at $100 each and then the transmission broke down.

00:09:39.000 So what seemed like a good deal at $277 a month has now become $500, $600 or higher.

00:09:47.000 A primary danger of signing up for a big ticket item on an installment plan is in overlooking these additional costs that can make the actual cost more than double your initial estimate.

00:09:58.000 It ended up costing $700 a month.

00:10:01.000 All I was earning at my job and plus overtime.

00:10:04.000 I had to sell it just to pay off the loan.

00:10:07.000 The second type of retail credit is the revolving charge account.

00:10:12.000 Most apartment stores issue charge cards that allow you to charge purchases up until you reach a predetermined credit limit.

00:10:20.000 A revolving charge account stays open as long as you pay at least the minimum amount due by the due date printed on your monthly statement.

00:10:30.000 A lesser known account is a 30 day account usually offered by local merchants who give you 30 days same as cash opportunity.

00:10:38.000 Buying items you have cash for and paying the full amount within 30 days is an excellent way to start building a good credit record.

00:10:46.000 Using retail credit wisely requires knowledge, discipline, and common sense as indicated by the following guidelines.

00:10:54.000 Remember that a credit line is a debt, money you owe, and must repay.

00:10:59.000 Weigh each purchase in your mind the same as if you were paying cash.

00:11:04.000 Pay each statement on time to avoid late charges and build a good credit history.

00:11:11.000 Do not establish more credit accounts than you can easily handle.

00:11:15.000 Note how much of your monthly payment is going to pay your debt.

00:11:19.000 If, for example, the minimum amount due is $20 and finance charges are $5, realize that you are only paying $15 towards what you owe.

00:11:29.000 The credit industry loves minimum payment customers because that's how they're making their bread and butter.

00:11:37.000 In fact, a minimum paying customer will be solicited for more credit in the future.

00:11:43.000 When they lower the monthly payment, they lower it to maybe the interest, or even a little lower, and you're paying all interest and nothing for the principal.

00:11:56.000 Most credit cards are issued as revolving credit and allow you to make purchases up to a predetermined spending limit.

00:12:03.000 This limit is set by the credit card company according to such factors as your past credit history, your income, your occupation, and so forth.

00:12:12.000 When starting out, your credit limit will be low, perhaps a few hundred dollars, but as you prove yourself by paying on time, Your account will be reviewed and your limit increased if you maintain a good record.

00:12:25.000 Credit card companies are in business to make money and they do it by charging interest.

00:12:32.000 As innocent as credit card applications may appear and as excited as you may be to get a MasterCard in the mail, you need to look closely and compare the several key variables that can over time make a difference of hundreds or thousands of dollars.

00:12:49.000 The first thing to look for is the APR or annual percentage rate of interest you will have to pay on your unpaid balance.

00:12:57.000 This rate can vary from 3 or 4 percent to as high as 22 percent or more.

00:13:03.000 You want to get the lowest rate possible.

00:13:06.000 You also need to be aware of the late payment fee and over-limit fee.

00:13:11.000 Late payment fees are charged when your monthly payment does not reach the company before the payment due date.

00:13:18.000 These fees can be $10, $15, even $25 or more, and no excuses are acceptable.

00:13:23.000 Your checks must reach the company and be posted before the payment due date.

00:13:28.000 Some companies will get you to sign up with a low late payment fee, then increase the fee later on as shown here by a simple mention on your statement.

00:13:37.000 This is a legal notice, so be sure to read your statements carefully.

00:13:41.000 If your minimum payment due is 15 and you missed the July 4th due date, this company will charge you a $29 late fee.

00:13:50.000 Another trick is to make a due date on a holiday, like this company, when no mail will be delivered.

00:13:57.000 These are the kinds of things that can add up and make a $10 pizza cost you $100 or more in the long run.

00:14:06.000 Overlimit fees are charged when you exceed your pre-set spending limit.

00:14:10.000 It would seem logical that if you tried to make a charge and the amount of the charge that would cause you to run over the limit, the charge would be denied.

00:14:18.000 Not so.

00:14:19.000 Credit card companies love to approve charges that cause you to exceed your limit by a few dollars so they can impose a $25 overlimit fee.

00:14:28.000 This is pure profit.

00:14:30.000 Always know where you are in relation to your limit and stay well below it.

00:14:35.000 If you are unsure, call the company on their toll-free line and find out your current balance before you go shopping.

00:14:42.000 Also, be sure to save all your charge receipts and verify them against entries on your monthly statements.

00:14:49.000 Credit card companies handle literally billions of entries a year and mistakes do occur.

00:14:54.000 Check your company's policy, usually written on the back of your statement, and notify them as soon as you discover any error.

00:15:02.000 Secured credit cards are gaining popularity.

00:15:05.000 And can be a good way to start building credit.

00:15:08.000 Instead of giving you a line of credit outright, secured credit cards are issued against a cash deposit in your account in their bank.

00:15:16.000 You deposit 400, you have a credit limit of 400.

00:15:20.000 It's that simple.

00:15:21.000 Debit cards are like secured credit cards, but actually deduct the amount of your expenses, plus a small transaction fee from the amount you have on deposit.

00:15:31.000 Prepaid phone cards work the same way.

00:15:34.000 The ATM or automatic teller machine card works like a debit card to allow you to withdraw cash from your checking or savings account.

00:15:42.000 This card usually requires no credit history, just a bank account with funds on deposit.

00:15:48.000 There are certain dangers of using an ATM card you need to be aware of.

00:15:52.000 First, you may forget or lose your PIN number and the machine won't work.

00:15:57.000 Second, you need to make certain that you are not observed entering your PIN number by a stranger.

00:16:03.000 As fraud can occur when strangers get a hold of this key information.

00:16:08.000 Thirdly, take your transaction receipt with you as leaving it by the machine is another way to leave yourself vulnerable to theft.

00:16:16.000 And fourth, be sure to keep a record of your withdrawals.

00:16:20.000 The greatest temptation and greatest risk to your good credit is to forget about the cash the machine gives you.

00:16:26.000 It will be a rude awakening when checks start to bounce and merchants begin to call.

00:16:32.000 This brings us to the subject of checking accounts, a source of convenience or dread depending upon how you handle your personal business.

00:16:40.000 Checks?

00:16:42.000 I don't know.

00:16:43.000 Write them, give it to the grocery store, just like money.

00:16:47.000 Checks are very handy for paying bills, ordering merchandise, and transferring money.

00:16:51.000 But this convenience does come at a cost.

00:16:54.000 Banks make money from your checking account in several ways.

00:16:59.000 Charging you for printing checks and deposit slips.

00:17:04.000 Charging you for handling checks and mailing statements.

00:17:08.000 Charging you service fees for overdrafts.

00:17:12.000 A word of warning about overdrafts.

00:17:15.000 Bounce checks are checks marked insufficient funds.

00:17:18.000 If you ever bounce a check, you know that there is no end to the trouble this can cause you.

00:17:23.000 And fees keep on rising.

00:17:25.000 Not only will a bounce check cost you $25 at the bank, but the merchant will charge you $25 too.

00:17:32.000 That $10 pizza paid for with a bad check can end up costing you $60 or more if that check also cost other checks to bounce.

00:17:40.000 One of the most important things you can do in life is to maintain a good credit rating.

00:17:46.000 As the world becomes more populated and less personal, computerized data is increasingly important to establish who and what we are.

00:17:55.000 A person's credit rating is one of the first things checked by employers, Landlords, car salesmen and other people who make decisions about your future.

00:18:06.000 In the United States, there are three primary credit reporting agencies, Equifax, TransUnion and TRW. Every time you apply for or use a credit card or charge card, these agencies collect information about you and your payment history.

00:18:21.000 Here are seven ways to build and maintain a good credit rating.

00:18:25.000 Write your name the same way on all credit applications.

00:18:30.000 Make all your credit card and charge card payments on time.

00:18:34.000 Always pay at least the minimum amount required.

00:18:37.000 Check your monthly statements for accuracy and correct any mistakes.

00:18:41.000 When you move, notify your creditors promptly about your new address.

00:18:46.000 If you run into trouble, alert your creditors quickly and make payment arrangements.

00:18:50.000 Review your credit report periodically to verify information.

00:18:55.000 If you ever apply for a credit card and are turned down, you are entitled to a free copy of your credit report under the Fair Credit Reporting Act.

00:19:04.000 Your letter will state the reason for denial and give you an address to write to.

00:19:10.000 If at any time you get in over your head and can't pay, seek out qualified help in agencies such as consumer credit counseling.

00:19:19.000 What you tell them is completely confidential and they will take your side and stop creditors from hounding you while you get reorganized.

00:19:28.000 There may be parents out there who are in a position financially to help get them out of debt instead of going someplace else.

00:19:35.000 But I think that the individual would learn a little bit more if they go through the process themselves, if in fact they're the ones who got themselves into that situation.

00:19:47.000 The primary way to avoid all of the problems we've mentioned so far is to live by this golden rule.

00:19:53.000 Never spend more money than you have.

00:19:56.000 If they apply the magic formula, we call it the 80-10-10 formula, they learn to live on 80% of anything they make.

00:20:04.000 So they can spend 80 cents out of every dollar, then they can give 10 cents away and save 10 cents.

00:20:12.000 They will learn to live on less than they bring in on a consistent basis.

00:20:17.000 If they can do this, they can become millionaires.

Alex Jones Show - January 01, 1998

19980101_PSA_Alex

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