Credit and Consumer Rights Ch. 20

Credit Buy goods & services at individual stores & pay for them later Credit limit - maximum amount a person can buy with the promise of payment Principle – actual cost of the good or service Interest – cost of borrowing money (the extra you pay to borrow money

Types of Charge Accounts Installment Account - Repaid with equal payments over a certain period of time. Part of the payment goes towards interest & part towards the principle - Car loan or mortgage Regular Account - No interest is charged if entire bill is paid on time – If you do not pay the entire bill on time, then you must pay interest on the entire loan amount. Account can’t be used again until the balance is paid Furniture Stores usually do this. Pay by 2025, certain amount each month, but with no interest. 3. Revolving Account - Billing cycles where a bill is sent at the end. Interest charged on portion not paid. Account can still be used until credit limit is reached - Credit Cards

Credit Cards Make purchases without having the money Charge high interest rates Lower interest rates if the customer is reliable (Makes payments on time!!!) Finance Charges – Cost of credit (interest) expressed in dollars Annual Percentage Rate – Cost of credit (interest) expressed as a percentage

Applying for Credit Credit Rating Fill out application Credit Bureau does a credit check Creditor may ask for references Credit checks show your income, debt and ability to pay past debts Credit Rating Rating of risk: Excellent, Good, Average or Poor Ratings have a number associated with them 3 Credit Bureaus: Experian, Transunion & Equifax Gives lenders an idea of reliability when issuing loans Higher Credit Score = less interest you are charged on a loan = saving $ Types of Loans Unsecured loans – loan based on reputation Secured loans – have collateral to back up the loan

Credit Bureaus

Government Regulations Equal Credit Opportunity Act: a person can’t be denied credit because of race, religion, national origin, gender, marital status or age Usury Laws: Restrict the amount of interest companies, not banks, can charge Bankruptcy Debts are so large they can’t be paid back Most of what a debtor owns is sold or given to creditors Takes about10 years to reestablish credit States can become bankrupt too

Consumer Rights Consumer – someone who buys a product or service Types of Income Disposable Income – money after taxes taken out. Money to pay for house, car, etc. Discretionary Income – money remaining after paying for necessities Either save or spend it

Consumerism – a movement to educate buyers on purchases and to make sure products are safe Congressional laws – Pure Food and Drug Act in 1906 Private groups – Better Business Bureau (BBB) Consumer Bill of Rights Consumers have… Right to a safe product Right to be informed Right to choose Right to be heard Right to redress (to remedy or set right a wrong/grievance)

Consumer Responsibilities Smart Buying Strategies Get info on products Watch out for advertising Comparison shopping – find out prices on product from different stores/internet Brand Name vs. Generic When product fails Report it Check the warranty Keep a copy of the receipt Be calm Make Fair complaints