Case Study Summary Description: In this Case Study, students will take on the role of a peer financial counselor to analyze credit card promotions and comparison shop for a card. They will also learn about alternatives to credit cards for those seeking to develop a credit history. Internet Usage:Optional Spreadsheet Skills:None

Alignment to Jump$tart National Standards Credit and Debit 1b: Explain how credit card grace periods, methods of interest calculation and fees affect borrowing costs 1c: Categorize the types of information needed when applying for credit 1d: Compare the total cost of reducing a credit card balance to zero with minimum or above-minimum payments, all other terms being equal and no further purchases being made

Gimme Some Credit

Jose recently became a peer financial advisor at his college. He was excited about this role because it combined his love of personal finance with his desire to help others in his college community. He often found himself amazed by the lack of knowledge that students had about money management, whether it was checking accounts, credit cards or student loans. His parents had taught him these valuable lessons growing up and he was excited to share these skills with students.

Jose had recently seen more students coming forward to ask him for advice regarding credit cards. He wasn't sure if it was peer pressure (one roommate telling another) or the wave of credit card spam that hit student email boxes recently. In fact, just that afternoon, Michelle had come to his office with one of these credit card offers (see below). She could not contain her excitement:

"Hey Jose, I couldn't believe this offer I got from a credit card company today. It's amazing to me that they don't charge me any interest and don't make me pay them back. Am I missing something as this seems too good to be true? I mean, what is the right way for me to evaluate such a great offer?"

Exhibit 1

Credit Card Offer

Answer this:

1. What should Jose tell Michelle about this offer? What are additional questions she should find answers to prior to getting this credit card?

Now that Jose helped Michelle, he was on to his next appointment with George. Jose pulled out George's file and began to read through his notes:

• College junior; recently turned 21
• Responsible approach to money; has a budget and emergency savings fund of $1,000
• Works 10 hours per week at local retailer during school year earning $10/hour
• Has $20,000 in federal student debt; not planning to start payments until grace period ends
• Had trouble renting an off-campus apartment when the landlord couldn't find his credit score
• When George ran credit report, he discovered that he had no credit history

George came in, excited to review a list of credit cards that he had spent some time analyzing on a credit card comparison site. When Jose asked him how he came up with his list, George mentioned that he had searched for cards that met his criteria: no annual fee, the best cash rewards, and available for those with a Good credit score (690-719). Before looking at the list that George brought in,Jose asked George why he'd decided to use a comparison site instead of visiting each card's website, and how he'd chosen the comparison site to use -- there are so many.George said his friend had vouched for this website and he thought the results looked pretty good.

Exhibit 2

Credit Card Comparison Site:

Answer this:

2. What should Jose tell George about comparison sites and their accuracy, business models and how they determine their rankings?

Now that Jose had given George a few tips on comparison sites, he recalled what he had learnedin his recent peer advisor training about the importance of listening to clients. Before jumping in with his own thoughts, he decided to listen to hear what George had to say:

"I really feel like it's time for me to get a credit card. I learned how important it is to have a credit history when I kept getting turned down for an off-campus apartment my sophomore year. Every time that a landlord pulled credit on me, they came up empty. Now that I am 21, I can apply for a credit card without having my parents' co-sign on the application because they would never agree to that! I hear that it is easy to land that first credit card, and I can't wait to apply.

Once I get a card, I want to know what the best way is to boost my credit score. I heard from a friend that you need to have a balance on your card by not paying off the card in full every month in order to get a credit score. He also told me it is ok to be late every once in a while, since credit scores are based on improving your payment habits and not whether you are paying every month on-time. That seemed to make sense to me."

As Jose thought about how best to respond to George, he realized that there were three questions he had better be prepared to answer to set George straight about credit:

Answer this:

3. Underline all of the misconceptions in George's explanation above.

4. Do you think George will be approved for one of the three cards on his list? Why or why not?

5. What is the best way to use a credit card to build your credit history?

6. What are other ways that George can start to build his credit history besides a traditional credit card? You may want to thishttps://www.thesimpledollar.com/credit-cards/improve-credit-score-without-a-credit-card/ to come up with ideas.