1. Chapter © 2010 South-Western, Cengage Learning Responsibilities and Costs of Credit 18.1 18.1Using Credit Wisely 18.2 18.2Costs of Credit 18

2. © 2010 South-Western, Cengage Learning SLIDE 2 Chapter 18 Responsibilities of Consumer Credit You have responsibilities to yourself. You have responsibilities to creditors. Creditors have responsibilities to you.

3. © 2010 South-Western, Cengage Learning SLIDE 3 Chapter 18 Responsibilities to Yourself Use credit wisely and do not get into debt beyond an amount you can comfortably repay. Check out businesses before making credit purchases. Comparison shop and avoid impulse buying.

4. © 2010 South-Western, Cengage Learning SLIDE 4 Chapter 18 Responsibilities to Creditors Some of your responsibilities are: Limit your spending Make payments Read and understand terms Contact creditor to resolve problems

5. © 2010 South-Western, Cengage Learning SLIDE 5 Chapter 18 Creditors’ Responsibilities to You Honestly representing goods and services. Informing customers about all rules and regulations, interest rates, credit policies, and fees. Cooperating with established credit reporting agencies. Establishing and adhering to sound lending and credit policies. Contacting customers who fail to meet their obligations and assisting in solving credit problems.

6. © 2010 South-Western, Cengage Learning SLIDE 6 Chapter 18 Protecting Yourself from Credit Card Fraud Credit card fraud costs businesses and consumers millions of dollars each year. Common types of fraud Illegal use of a lost or stolen credit card Illegal use of credit card information intercepted online While the credit card holder’s liability is limited to $50, the merchant is not protected from loss. Merchants often raise their overall prices to cover such losses.

7. © 2010 South-Western, Cengage Learning SLIDE 7 Chapter 18 Safeguarding Your Cards Sign and activate cards immediately. Carry only cards you need. Keep a list of cards and information about them in a safe place. Notify creditors if a card is lost or stolen. Watch card during transactions. Tear up old receipts.

8. © 2010 South-Western, Cengage Learning SLIDE 8 Chapter 18 Safeguarding Your Cards Do not lend cards or leave them lying around. Destroy expired cards. Do not give credit card information by phone or online to people or businesses you don’t know. Keep receipts and verify charges on statements. (continued)

9. © 2010 South-Western, Cengage Learning SLIDE 9 Chapter 18 Protecting Your Accounts Online Deal with companies you know and trust. Look for secure site symbol. Encryption is a code that protects your account name, number, and other information. When information is encrypted, it is made unreadable to others trying to read it. Review privacy policy.

10. © 2010 South-Western, Cengage Learning SLIDE 10 Chapter 18 Protecting Your Accounts Online Initiate all transactions yourself at sites you trust. Phishing is a scam that uses online pop-up messages or e-mail to deceive you into disclosing personal information. “Phishers” send messages that appear to be from a business that you normally deal with, such as your bank or Internet service provider (ISP). (continued)

11. © 2010 South-Western, Cengage Learning SLIDE 11 Chapter 18 Avoiding Unnecessary Credit Costs Accept only the amount of credit that you need. Unused credit can count against you. Unused credit is the remaining credit available to you on current accounts. Make more than the minimum payment. Do not increase spending as income increases. Keep your credit accounts to a minimum. Pay cash for small purchases.

12. © 2010 South-Western, Cengage Learning SLIDE 12 Chapter 18 Avoiding Unnecessary Credit Costs Shop for loans. Take advantage of credit incentive programs. With a rewards program, you will receive a payback in the form of points that can be redeemed for merchandise or airline tickets. With a rebate plan, you get back a portion of what you spent in credit purchases over the year. (continued)

13. © 2010 South-Western, Cengage Learning SLIDE 13 Chapter 18 Why Credit Costs Vary Economic conditions Type of credit or loan Fixed-rate loans are loans for which the interest rate does not change over the life of the loan. With variable-rate loans, the interest rate goes up and down with inflation and other economic indicators. The business’s costs of providing credit. (continued)

14. © 2010 South-Western, Cengage Learning SLIDE 14 Chapter 18 Simple Interest Formula The formula for simple interest is: (continued) Interest (I) = Principal (P) × Rate (R) × Time (T) I = P × R × T