Consumer Responsibilities and Protections Ch 11

Personal Financial Goals Everyone is a consumer Make decisions about time and money Limited income Maximize your utility (satisfaction) Personal Finance- way you plan to save or spend income

Personal Financial Goals Set financial goals Achieve financial goals Ask questions- do I need this product? Is it the best deal? Can I afford it? Will it prohibit me from buying something in the future? Seek expert advice- understand before you buy Ask other people- is it useful? What to expect of it? Shop at reputable businesses

Make wise consumer Decisions Budget your income Budget worksheet Keep it up to date Comparison shopping Rational Consumer Choice- satisfaction greatest per dollar

Paying for your Purchases Will it be Cash or Charge? Cash Give up ability to purchasing other things in the future Credit Give up less to spend in the future Interest and fees Prices of big items go up Don’t have money when young

Sources of consumer credit Consumer Loans- borrowing money to be repaid in regular installments over time Car Loans Student Loans Home Loans Longer the period more interest Incurred Better credit rating better interest rate

Sources of consumer credit Consumer Sales Credit- amount charged to an account that involves variable payments over time Credit card Fees Annual fee Exceed limit fee Interest on Credit card Debt Grace period- typically 21 days- must pay full balance If not paid off in grace period- will get interest added of 12-20% Unsecured loan- no collateral- high interest

Receive and use Credit Three C’s of Credit Character- measure of financial responsibility- determined by credit history Capacity- Consumer ability to repay a debt on time- income- amount already in debt Capital- measure of the value of things a consumer owns that could be sold or cash to repay a loan

Receive and use Credit Credit-Reporting Agencies Equifax Experian Trans Union Credit ratings- measure of persons credit worthiness History of making payments Current debt Credit history Recent applications for credit Type of credit used

Receive and use Credit Credit Scores- assigns a score to each consumer indicating whether a person is a good or bad credit risk Minimum score set for loans and credit cards Accessing your credit file

Avoid Credit Problems Use Credit wisely- dangerous since it is so easy to use Establish a positive credit history Be a regular saver Ask for a credit card from the bank where you save Make payments on time and never exceed credit limit Repair a Damaged Credit Rating Contact lenders in a bad situation Avoid using additional credit Identify most important lenders and pay them first When situation improves use credit regularly in small amounts Pay off account balance in full every monthly At least pay more than the minimum

Government efforts to protect consumers Food and Drug Administration (FDA)- set food and drug standards Federal Trade Commission (FTC)- businesses market in fair honest way Consumer Product Safety Commission (CPSC)- protect from dangerous products Environmental agency (EPA)- standards on toxic emissions

Take responsibility for your own protection Consumer rights and responsibilities Informed Directions Return products Use Common Sense Use products safely Replace bald tires Cheap items only last so long

Dealing with identity theft Identity Theft- someone fraudulently uses you identity to obtain credit or access to financial accounts Protect yourself from identity theft Cover pin number Memorize SSN- don’t carry card Shred bank statements or bills or anything with SSN on it Be suspicious if people ask about financial information

Dealing with identity theft What if your identity is stolen? Contact all three credit reporting agencies, put fraud alert on file Close existing accounts at buisnesses where you have credit Report to law enforcement Contact FTC Average victim pays $600 and 40 hours to fix problem