1. Credit: Buy Now, Pay Later Financial Literacy

3. Standard 3 Students will understand principles of money management.  Objective 2 Understand credit uses and costs. Understand credit uses and costs.

4. Questions to Consider  What is credit?  What does it cost to use credit?  What are the advantages of using credit?  What happens if you misuse credit?

5. Today, there are three kinds of people: the have's, the have- not's, and the have-not-paid- for-what-they-have's. Earl Wilson

6. KNOWLEDGE

7. Credit  A legal agreement to receive cash, goods, or services now and pay for them in the future.

8. Credit Cards  Plastic cards with electronic information that can be used by the holder to make purchases or obtain cash advances using a line of credit made available by the card- issuing financial institution.

9. The Risk of Credit Cards  http://www.youtube.com/watch?v=lLAFhTj sQHw http://www.youtube.com/watch?v=lLAFhTj sQHw http://www.youtube.com/watch?v=lLAFhTj sQHw

10. Installment Loan  A loan in which the amount of payment and the number of payments are predetermined, such as an automobile loan.

11. Co-Signer  The person who agrees to be responsible for loan payments if the borrower fails to make them.

12. Debit Cards  Debit cards are plastic cards with electronic information, that look very similar to credit cards, that you can use to take money out against your checking account.  When you swipe your debit card remember that the money is taken immediately from your checking account.

13. Collateral  A form of security to help guarantee that a creditor will be repaid.

14. The Cost of Using Credit SCENARIO:  Interest Rate 17%  Minimum Payment 2.5% or $10.00 Balance Time to Pay Off Interest Charged Total Pay $1,000.00 12 years $979.00$1,979.00 $2,500.00 19 years $2,941.00$5,441.00 $5,000.00 24+ years $6,210.00$11,210.00

15. Warning Signs of Credit Abuse  Late fees  Increased interest  Increased balance  Missed payments  Collection notices  Bounced checks

16. Assessment  Using three different interest rates, determine the cost of an item purchased on credit as compared to paying cash.

17. Cost of Credit

18. Credit Reports  What is a credit report?  How do you build a good credit history?  How does a credit report influence your economic future?  FreeCreditReport.com all 9 commercials - YouTube FreeCreditReport.com all 9 commercials - YouTube FreeCreditReport.com all 9 commercials - YouTube

19. Credit Reporting Agencies  EquiFax 1.800.685.1111 www.equifax.com 1.800.685.1111 www.equifax.comwww.equifax.com  Experian 1.888.397.3742 www.experian.com 1.888.397.3742 www.experian.comwww.experian.com  TransUnion 1.800.860.7289 www.transunion.com 1.800.860.7289 www.transunion.comwww.transunion.com  www.annualcreditreport.com

20. Credit Rating  A measure of a person’s ability and willingness to make credit payments on time.

21. Credit Scores Affect Financial Options  HIGH SCORES Low interest rate on loans Low interest rate on loans Ability to receive loans/credit Ability to receive loans/credit Reflects borrower is a low risk to lender Reflects borrower is a low risk to lender Ability to acquire conveniences such as cell phones and credit cards Ability to acquire conveniences such as cell phones and credit cards  LOW SCORES High interest rate on loans Inability to receive loans/credit Reflects borrower is high risk for lenders Inability to acquire conveniences

22. Top 10 Questions to Ask Yourself Before You sign on the Dotted Line 1. Do I really need this item right now or can I wait? 2. Can I qualify for credit? 3. What is the interest rate (APR)? 4. Are there additional fees? 5. How much is the monthly payment and when is it due?

23. Top 10 Questions to Ask Yourself Before You sign on the Dotted Line 6. Can I afford to pay the monthly payments? 7. What will happen if I don’t make the payments on time? 8. What will be the extra cost of using credit? 9. What will I have to give up to pay for it? (opportunity costs) 10. All things considered, is using credit worth it?

24. Concerning Interest On Debt… Interest never sleeps nor sickens nor dies; It never goes to the hospital; It works on Sundays and holidays; It never takes a vacation; It never visits or travels; It takes no pleasure; It is never laid off work nor discharged from employment; It never works on reduced hours Once in debt, interest is your companion every minute of the day and night; you cannot shun it or slip away from it; you cannot dismiss it; it yields neither to entreaties, demands, or orders, and whenever you get in its way or cross its course or fail to meet its demands it crushes you. ~ J. Ruben Clark

25. Buying on trust is the way to pay double.

26. Building a Credit Rating  Some people use credit to develop a good credit rating. Once a good credit rating is established they can get credit for larger purchases such as automobiles, houses, etc.

27. Free Use of Another’s Money  Generally firms do not charge interest if the entire debt is paid by the end of the billing cycle. The buyer uses another’s money for that period of time.

28. Limit Freedom to Use Future Income UUUUsing credit will limit the amount of future income for other purchases. Using credit means you will pay for the item in the future…both the principle and the interest.

29. Decrease Cost Due to Sale Price  Some people use credit when there is a good sale. In some instances they pay less because the savings from the sale exceed their credit charges.

30. Strategies for maintaining positive credit include: PPPPracticing good banking techniques, such as not bouncing checks PPPPaying bills on time and consistently AAAAvoiding bankruptcy NNNNot having a criminal record HHHHaving a low number of credit/store cards RRRRemoving errors from credit report MMMMaintaining reasonable amounts of unused credit

31. Credit Scoring Personal items of value The ability to be trusted The ability to repay a loan

32. Get Out Of Debt

33. Did you know 61% of Americans said their knowledge of credit reports is fair to poor? Did you know only 3% of Americans can name the three main credit reporting agencies? Can YOU?

34. DEBT is…

35. Helpful Tips  Rights and Responsibilities  How to Get Out of Excessive Debt

36. Assignment 5.1  Using the brochures provided, compare four credit card terms. Fill in the table on page 64 and type two paragraphs summarizing your findings.

37. There are only two ways to live your life. One is as though nothing is a miracle. The other is as though everything is a miracle. Albert Einstein

38. THE END