1. Credit & In America: Crisis or Way of Life?
Economics
Pineda *

2. Schedule for this week – Per 2
Mon & Tues – Notes & Discussion on “Credit & Debt in America” -what is credit / debt? -how does credit work? -charge accounts & buying on credit, Quiz 1 and 2 on credit, etc. Fri – Quiz 3 & Documentary “The Secret History of the Credit Card” + Essay Assignment *

3. Credit is receiving of funds either directly or indirectly to buy goods and services today with the promise to pay for them in the future.
Principal is the amount of money you originally borrowed.
Interest is the amount of money you pay for borrowing money.

4. Purpose of Credit
People use credit for two reasons: 1. To get what they want without waiting
2. To spread payments over time.
When you use credit you also pay interest on the credit you use. It’s a good idea to know the cost of credit (interest rate, aka APR) before you make a decision

5. Not All Debt Is Evil
Credit is a valuable tool, yet many people misuse and overuse it.
Installment Debt is the most common form of debt
-Debt is repaid over a period of time
in equal payments
-Most people use credit to buy durable
goods (items that last longer than three
years)
-Largest example of installment debt are
mortgages for homes

6. Excessive Debt Six Warning Signs
1 Making only the minimum payment
2 Maxing or nearly maxing out credit cards
3 Not knowing how much is owed
4 Using credit cards to purchase items that used to be purchased with cash
5 Paying off one card with another card
6 Phone calls or letters from creditors

7. Lowering Your Debt
-Ask Your Credit Card Company To Lower Your Interest Rate
-If Your Card Company Won’t Lower – Shop For A Lower Rate Card
-Set up a tight budget and stick to it. Find ways to save money
-Set realistic goals

8. If You Are In Trouble -Stop Borrowing -Contact Your Creditors
-Know your rights. Review the Fair Debt Collection Act
-Speak with a credit counselor

9. Types of Financial Institutions
1. Commercial Banks- main business checking, savings, and loans: Bank of America; Chase; Wells Fargo
2. Credit Unions- is owned and operated by its members and offer competitive rates: California Credit Union, Universal City Studios Credit Union
3. Finance Companies- makes loans to customers on behalf of stores: HSBC Group will finance Felix Chevrolet
4. Savings and Loan Associations- like a bank except no checking: Downey Savings & Loans 5. Savings Banks- Like the first two except smaller: Broadway Federal Bank, Century Bank

10. How does Credit work?
Finance Charge- is what you pay for the privilege of using credit.
Annual Percentage Rates (APR)- is the cost of credit expressed as a yearly percentage.
Debit Cards- is like a credit card except you use the cash in your checking account to pay for things.
US Debt Clock

11. BofA MasterCard WALTER PINEDA March Purchases 1. Tony Roma’s $50
2. Universal Studios $100
WALTER PINEDA
APR of 9% (charged when MINIMUM is paid or you don’t pay)
Balance (all expenses) for March = $
Total Payment Due in April = $
MINIMUM Balance Due = $20.00
Amount you will 9% =
New Balance for May = Unpaid BAL + .09% = *

12. BofA MasterCard Balance (expenses) for April = $ _____
April Purchases
1. Jack in the Box $10
2. K-Mart $50
3. Metro PCS $50
4. Senior Portraits $100
Rosemary Vela
APR of 11% (charged when MINIMUM is paid or don’t pay)
Balance (expenses) for April = $ _____
Total Payment Due in May = $ _____
MINIMUM Balance Due = $30.00
New Balance for June = unpaid BAL + .11% = *

13. BofA MasterCard Quiz 1 APR = 17% Balance for March 1 = $ _______
March Purchases
1. Gap $50
2. Gus’s $20
3. City Walk $50
4. Sears $70
$10
APR = 17%
Balance for March 1 = $ _______
Total Amount Due by April 1 = _______
Minimum payment is $15, and you pay it.
Amount you will 17% _______
New Balance for May = $ _______ *

14. BofA MasterCard Quiz 1 KEY
March Purchases
1. Gap $50
2. Gus’s $20
3. City Walk $50
4. Sears $70
$10
APR = 17%
Balance for March 1 = $200
Total Amount Due by April 1 = $200
Minimum payment is $15, and you pay it.
Amount you will 17% = $185
New Balance for May = $216.45 *

15. BofA MasterCard Quiz 2 Previous unpaid balance from February = $700
March Purchases
1. King Taco $20
2. Target $10
3. The Grove $50
4. Senior Packet $300
5. JC Pennys $40
APR 11%
Previous unpaid balance from February = $700
Balance for March 1 = $ _____
Total Amount Due in April 1 = $ _____
Minimum payment is $15, and you pay it.
Amount you will 11% $_____
Interest (APR) you will pay $ _____
New Balance for May = $_____ *

16. BofA MasterCard Quiz 2 KEY
March Purchases
1. King Taco $20
2. Target $10
3. The Grove $50
4. Senior Packet $300
5. JC Pennys $40
APR 11%
Previous unpaid balance from February = $700
Balance for March 1 = $1,120
Total Amount Due in April 1 = $1,120
Minimum payment is $15, and you pay it.
Amount you will 11% = 1,105
Interest (APR) you will pay $121.55
New Balance for May = $1,226.55 *

17. Are You Worthy of Credit?
Several factors affect your creditworthiness:
1. Your credit Rating- how you handle credit
2. Capacity to Pay- how much debt do you have versus how much you make
3. Character- your reputation
Collateral- is money, cars, homes
Secured Loans- are loans that are backed up by collateral
Unsecured Loans- have no collateral *

18. Consumer Protections
I. Truth in Lending Act (1968) Ensures that consumers are fully informed about costs of borrowing II. Fair Credit Reporting Act (1970) Protects privacy and accuracy of your credit report III. Equal Credit Opportunity Act (1974) prevents discrimination when applying for credit IV. Bankruptcy- is when you can’t repay your debt; it ruins your credit for ten years and you lose stuff still owed!

19. QUIZ Time!!!

20. Previous Balance (carry over) from Dec = $231
Practice
January Purchases
1. King Taco $20
2. Target $10
3. The Grove $50
4. Senior Packet $300
5. Tome Liquor $40
APR 17%
Previous Balance (carry over) from Dec = $231
Balance for Jan 1, 2017 = $ _____
Total Amount Due by Feb 2017 = $ _____
Minimum payment is $5, and you pay it.
Amount you will 17% $ _____
Interest (APR) paid is $ ____
New Balance for March = $_____ *

21. Previous Balance (carry over) from Dec = $231
January Purchases
1. King Taco $20
2. Target $10
3. The Grove $50
4. Senior Packet $300
5. Tome Liquor $40
KEY
APR 17%
Previous Balance (carry over) from Dec = $231
Balance for Jan 1, 2017 = $420
Total Amount Due by Feb 2017 = $651
Minimum payment is $5, and you pay it.
Amount you will 17% = $646
Interest (APR) paid is $109.82
New Balance for March = $755.82 *

22. QUIZ 3

23. QUIZ 3 Carry over from April is $399.99 Balance for May is $ _______
May Purchases
1. Office Depot $40
2. Gap $20
3. Americana $150
4. Best Buy $1000
APR 29%
Carry over from April is $399.99
Balance for May is $ _______
Total Payment Due in June = $ _______
MINIMUM Payment is $50
$ ______ will be 29%
Interest = $ _____ New Balance for June = $ _____ *

24. Next: The Secret History of the Credit Card
THE END
Next: The Secret History of the Credit Card
-But first, more practice using credit cards
-Quiz 3 *

25. Assignment 1. Select one question 2. Take notes on your question
3. Write (typed) a 5-paragraph essay on your question
4. Due Monday – 100 points *