What is Consumer Credit? What is Consumer Credit? “Borrowing money from someone with the idea of paying it back later with interest.” Chapters Credit “Managing Your Money” Your Name:___________________ Save this file in your server folder— call it: Your Name Credit

Ch. 7-1 “Buying Decisions” Define “Impulse Buying”:

Ch. 7-1 “Buying Decisions” What is meant by a “buying plan?” (Tell about the specific parts of it)

Ch. 7-2 “Sources of Credit” What is Credit? What is Revolving Credit? What is Installment Credit?

Ch. 7-2 “Sources of Credit” Cont’d When a bank loans money to you, they may ask for collateral. Define collateral: What is meant by a “Line of Credit?”

Ch. 7-2 “Benefits of Credits” List 3 advantages of using credit. Explain each.

Ch. 7-3 “Costs of Credit” Define Fixed Interest Rate: Define Variable Interest Rate:

Ch. 7-3 “Costs of Credit” List the 3 methods of computing interest: (Explain each)

Ch. 7-3 “Costs of Credit” What is a penalty? How does one get a penalty? What happens if you charge over your credit limit?

Ch. 7-3 “Checking Credit Statements” Explain the steps to check a credit statement for accuracy:

Ch. 8-1 “Payment Methods” List the several ways you can make a payment on your account. Define Money Order: Define Certified Check:

Ch. 8-2 “Consumer Loans” What is an “Installment Loan”? What is a “Secured Loan”?

Ch. 8-2 “Consumer Loans” What is a “Cosigner”? What are the dangers of being a Cosigner?

Ch. 8-2 “Consumer Loans” What terms should you carefully consider when you are considering borrowing money? (p ) Give details for each.

A banker or loan officer will consider what is known as the 3 c’s of credit before they decide to loan money to you. Google the 3 c’s of credit and list them below with a definition of each. 3 “C’s of Credit & You”

Ch. 9-1 “Resolving Credit Problems” Errors & Fraud: Describe strategies you should take to dispute incorrect charges on your statement. Credit Card Fraud: What is credit card fraud and what can you do to prevent it from happening?

Ch. 9-1 “Credit Delinquency” Define Delinquency: What is a Collection Agency? What is meant by Garnishment?

Ch. 9-1 “Credit Delinquency” What is Repossession? What is a Foreclosure?

Ch. 9-2 “Bankruptcy” Define Bankruptcy. What are common reasons that may cause bankruptcy?

Ch. 9-2 “Bankruptcy” Define “Chapter 7” Bankruptcy. Define “Chapter 13” Bankruptcy.

Ch. 9-3 “Credit Reports & Scores” Define Credit Report. What are the 3 Major Credit Bureaus? What credit range is considered good to excellent?

Ch. 9-3 “Credit Scores” List things you can do to improve your credit score.

My Fico Score: Internet: Go to (or “Google Image” it) and copy and paste the pie chart that illustrates the breakdown of a credit score in the space below:

Ch. 9-2 “Your Consumer Rights” Define “Fair Credit Reporting Act”. Define “Truth-in-Lending Act”. Define “Fair Credit Billing Act.” Define “Equal Credit Opportunity Act.” Define “Fair Debt Collection Practices”.

** Stop ** Review ** Stop ** Review The following remaining slides are for you to read. It’s a great review for your test on this unit. Read through them carefully—you don’t need to do anything else with them. Just read.

Buy now…pay later!!! A few facts to ponder… Total Credit Card debt for the Nation stands at $750 billion! Average family carries a balance of $8000 from month to month. Individually, Americans owe $2,293 in credit card debt. Average balance on a single credit card is $8000

Average household has 10 credit cards Almost ½ the households in America report having trouble paying their minimum payments. Average interest rate is 19% Interest is the fee you pay for borrowing the money Americans paid out approx. $82 billion in interest alone in Average Late fee charges: $35

Think about this… If your credit card balance is $8,000 and you make the minimum monthly payment at 18% interest, it will take you 25 years, 7 months to pay the debt off. You will pay $15,432 in interest charges (almost twice the balance), bringing your total to $23,432 Example: 2% of $8000 = $160 minimum Monthly payment

What is a creditor? An entity bank finance company credit union business an individual to which money is owed (grandma, if she likes you well enough to borrow you money)

Think “Debt to Income Ratio” Pay close attention to yours… To calculate: Divide your debt by your income. Example A person making $20,000 a year gross income with $10,000 of outstanding debt has a 50% DTI Ratio. Note: Anything over 45%, you will be offered higher interest rates when applying for loans. The lenders (bank) will see you as “Overextended”.

Credit Cards… tricky, tricky lowest They pay the balance off the lowest interest rate first. Scenario… Let’s say at the end of May 2009, you have a $2000 balance at 18% interest rate on your Visa card. Then, in August of 2009 you decide to take advantage of a “special offer” from Visa that allows you to balance transfer a $500 amount from another credit card at a low rate of 4%. **Your next bill statement in September 2009 will have both amounts listed on the statement. However, notice that any payment you make will be applied to the 4% interest amount first until that part is paid off. Then, your payment will go back to paying off the 18% interest part of the balance. What’s wrong with this?

It easy to have good credit PAY ALL YOUR BILLS ON TIME. What's on time? When they say they are due. Be on time. Paying the minimum is ok.

So, to recap… Most Importantly… 1. Keep all credit cards no higher than 30% of their limits. A. ex: $5,000 limit at 30%=$1,500 So, charge no more than $3,500 on that card with the $5000 limit 2. Only have 3-5 cards max. Better to have 4 small balances than one large balance. 3. Balance transfers bring your score down. 4. Don’t buy on ZERO down cards or retail store. 5. Credit counseling services look like a bankruptcy on your credit. 6. Do not co-sign for other people. (NEVER) 7. Avoid joint accounts with spouses. (Divorce) 