1. Lorin is very careful when writing checks. Which check writing procedure does she use to avoid negligence when writing a check? A. Changing the figures and written amount B. Not signing check C. Writing close to "Pay to Order of D. Writing figures only 2. Belinda has opened a checking account and wants to avoid writing a bad check. What should she do immediately?  A. Ask the bank to issue a stop payment B. Check for outstanding deposits C. Make a deposit and then write the check D. Verify the account balance will cover check 1

 Warm up  Notes-Sources of Credit  Introduce Credit—Video Clip  Handouts-Review 2

Unit C Basic Business Law Objective 6.02

 Credit Cards and Charge Accounts  Unsecured form of credit  Interest Calculations  Adjusted Balance – Finance charges added after subtracting payment  Previous Balance – Finance charges are figured as if no payment was made  Average Daily Balance – Finance charges figured by adding balances for each day in billing period and then divide by the number of days in the billing period  Simple Interest = Principal * Rate * Time 4

 Installment Plans  Secured – Collateral used to secure loan  Pledge – Creditor obtains possession of collateral by written or oral agreement  Security agreement – Contract where debtor retains possession of collateral under a written contract  Repossession – Taking back of items used to secure loan when payment is not made  Unsecured – No collateral used 5

 Closed end credit – Credit given for a specific amount of money and payments are made.  Open end credit – Credit that can be increased by debtor up to a limit set by creditor, a line of credit is given. 6

 Simple Interest Formula: I = PRT ◦ Sally buys a car at 6% interest for $25, on a 5 year plan. How much interest does she pay?  I – Interest = $  P – Principle = $25,  R – Rate = 6%  T – Time = 5 years  I = $25, * 6% * 5  I = $

 Adjusted Balance = Previous Balance – Payments  Adjusted Balance * Interest = Finance Charge  Michael’s credit card has a balance of $ and he makes a payment of $ The credit card company charges 7.75% interest per month. What is the interest using the adjusted balance method?  Adjusted Balance = $  Previous Balance = $  Payment = $50.00  Interest = 7.75%  Finance Charge = $7.75  $ $50=$  $ * 7.75% =$7.75 8

 Previous Balance * Interest = Finance Charge  Michael’s credit card has a balance of $ and he makes a payment of $ The credit card company charges 7.75% interest per month. What is the interest using the previous balance method?  Previous Balance = $  Interest = 7.75%  Finance Charge = $11.63  $ * 7.75% =$

 After watching the short video on credit, write down on today’s warm up 5 things you learned about using credit wisely. 10

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1. Daniel buys goods on credit or borrows money. Which term identifies Daniel? A. Creditor B. Debtor C. Loanee D. Secured Party 2. Stephen uses his home as security for a loan. Which term describes the use of his home in this transaction? A. Collateral B. Credit C. Interest D. Surety

 Criteria of Negotiability  How to compute interest using different methods 13

 Warm up  Review Methods of Calculating Interest  Notes-Loan types and Loan Procedures  Research Credit Cards  Study your notes for objectives 6.02— Yesterday and Today’s notes 14

Unit C Basic Business Law Objective 6.02

Secured Loan Creditors obtain an interest in something of value 1.Collateral – Property that is the subject of the loan 2.Cosigner – Helps protect a loan when a borrower’s credit rating is poor 3.Secured Party – Lender or seller who holds secured interest 4.Repossession – Property is returned because of non-payment 16

Unsecured Creditors obtain no collateral for loan 1.No Collateral 2.Creditors make sure that debtor is reliable and able to pay back loan 3.Example (Credit Cards) 17

Single Payment Loan Debtor pays off loan in one payment 1. Promissory Note - Written promise to repay with interest 2. Installment Loan - Paid in regular payments 18

Truth in Lending Act Regulation Z 1.Actual cost of finance charge must be known 2.Annual percentage rate 3.Liable for $50 unauthorized credit card purchases made prior to notification 19

Equal Credit Opportunity Act 1.Applying for credit 2.Granted only on the ability to repay 3.Evaluation of application 4.Cannot discriminate based on gender, age, ethnicity, or religion 5.Acceptance and rejection  Based on income, current debts, or poor credit record 20

21 Procedures for Borrowing Money  Loan Application Consideration  Reputation for paying bills  Source of regular income  Competency  Number of dependants  Use of loan and for how long

 Rules  Cannot ask sex, race, national origin, or religion  Cannot refuse on basis of sex or marital status  Marital status may/may not be asked  Do not have to disclose income from alimony or child support unless relying on income  May not be prohibited from using given names (birth) 22

 Interview  Reference and credit check  Request for credit  Inaccuracy of credit report  Acceptance/Rejection  Must inform client within 30 days  If denied, must provide, upon request, reasons for denial within 60 days  Cannot close account due to change in marital status, unless person unwilling/unable to pay 23