CREDIT IN AMERICA

 Credit –  Over ______ of all purchases in the U.S. are made on credit.  What do you buy with credit?

 Credit became necessary during the ________ ___________  Earliest form of credit was the account at the _______ _____.  In the 1800s bank interest rates were ________% and loans generally were made only in emergencies.

 Since 1900 interest rates have dropped.  B/c credit increased people’s ability to buy ______ and _______, the American economy grew at a rapid pace.  credit became the American way of life.  1970s brought _______ ______ ______ and credit counseling.  In the 1990s record numbers of people declared _________.

 Credit can be ________ and cause serious financial trouble.  Credit is easy to get  Buying over the _______ has increased the use of credit.  Many _______ have there own credit cards.  Avg. American has more than ______ in credit card debt

 Debtor –  Creditor –

 Qualifying for credit is based on 3 things: 1.Income – 2.Financial position:  Capital – 3.Collateral –

 Principal –  Balance due –  Finance charge –  Minimum payment -

 Due date –  Late fee –  Installment agreement –  Secured loan –

 Credit can expand your purchasing potential and raise your ___________________.  You can establish a good credit ________.  Credit can help in emergency situations.  Line of Credit –

 Credit is convenient.  Deferred billing –  Credit provides _______ ___ ________.  Carrying a credit card is safer than large sums of cash.

 Credit purchases may cost more.  Adds _________ _________.  You tie up future income.  Buying on credit can lead to ____________.

 Open-ended credit –  Closed-end credit –  Service credit –

 Credit cards  Has a stated limit  Can be used again and again  30 Day Accounts-  Revolving Credit Accounts –

 Billed at the end of each month.  Annual Percentage Rate –  Grace Period –

 Annual Fees –  Penalty fees-  Late fees –  Methods of Calculating Finance Charges - depends on lender

 Pay for expensive items like _____, ___________, _________.  Fixed payments over a set period of time  Not allowed to continue borrowing after date.  ___________ loan  Product is usually _________.

 _______ services  Services are provided in advance and then paid for.  Bills must be paid _________.  May charge fees for late payments.

     

 Retail stores ◦ ◦

 Credit Card Companies ◦ Ex: Visa, Mastercard, American Express, Discover ◦ ________________accepted nationwide ◦ Line of credit up to a limit ◦ May use a cash advance -

 Banks and Credit Unions ◦ Interest rates vary ◦ Loans or credit cards ◦ Credit unions are more willing to make loans b/c the members have stake in the success of the credit union; usually have lower loan rates than commercial banks

 Finance Companies- ◦ Consumer finance companies – consumer durables (ex: cars, refrigerators) ◦ Sales finance company – makes loans through authorized representatives (ex: GMAC)  Finance companies usually charge max rate allowed by law

 Loan Sharks –  Usury Laws –

 Pawnbrokers – ◦ Possession must be readily salable ◦ Makes loans based on appraisal value ◦ Can redeem item by paying back the loan plus interest in a set time ◦ If not paid back, the broker can sell the items in the pawn shop

 Private Lenders –  Other Sources: ◦ Life Insurance – can borrow from cash value; reduces value of life policy. ◦ CDs – can be used as collateral