1. © 2010 South-Western, Cengage Learning Do Now: 1.) Take out chapter 17 outline When shopping do you: 1.) See something you want and buy it 2.) Look around and find the product Is this similar or different depending on the product?

2. © 2010 South-Western, Cengage Learning Chapter 18 2 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 ■ Impulse Buying: ■ Buying something without thinking.  More likely to happen with lower costing products (EX- food, clothing). ■ Comparison Shopping: ■ Looking around for the best price. (EX- smart phone, TV, a new car).

4. © 2010 South-Western, Cengage Learning Chapter 18 4 Responsibilities of Consumer Credit ■Try and avoid impulse buying. ■When you open an account, you are pledging your honesty and sincerity in the use of credit.

5. © 2010 South-Western, Cengage Learning Chapter 18 5 Avoiding Unnecessary Credit Costs ■Make more than the minimum payment, and do not increase spending as income increases. ■Keep your credit accounts to a minimum. ■Pay cash for small purchases. (EX- You owe $5,000 with 18 % APR and make the minimum payment over 33 years- you will end up paying approx. $12,000 on a loan of $5,000).

6. © 2010 South-Western, Cengage Learning Chapter 18 6 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 stolen card, illegal use of credit info intercepted online. ■Protect you online accounts: ■Looking for secure site symbol (lock symbol) ■Notice encryption: code that protects your account name, number, and other information

7. © 2010 South-Western, Cengage Learning Chapter 18 7 Beware of Online Scams ■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).

8. © 2010 South-Western, Cengage Learning Chapter 18 8 Safeguarding Your Cards ■Sign and activate cards immediately. ■Carry only cards you need. ■Notify creditors if a card is lost or stolen. ■Watch card during transactions. ■DO NOT GIVE credit card information by phone or online to people or businesses you don’t know.

9. © 2010 South-Western, Cengage Learning Chapter 18 9 Why Credit Costs Vary ■Remember the 5 C’s of Credit ■Amount financed and length of time ■Ability to repay debt ■Collateral ■Interest rates ■The prime rate is the interest rate that banks offer to their best business customers, such as large corporations. ■Individuals pay higher rates because the risk is greater to the lender.

10. © 2010 South-Western, Cengage Learning Chapter 18 10 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 factors (economic indicators). (continued)

11. © 2010 South-Western, Cengage Learning Chapter 18 11 Simple Interest Formula ■Simple interest is interest computed only on the amount borrowed (or saved), WITHOUT compounding. ■The unpaid portion of a loan is the principal. ■EX- You borrow $1,000 x 5%= $50 (Interest).

12. © 2010 South-Western, Cengage Learning Let’s Practice…