1. LESSON 8-3 CREDIT MANANGEMENT LEARNING GOALS: - LIST WAYS TO REDUCE YOUR CREDIT COSTS AND LOWER YOUR DEPENDENCE ON CREDIT. - EXPLAIN HOW TO AVOID CREDIT COSTS AND DECEPTIVE CREDIT PRACTICES.

2. MANAGING CREDIT USE  Use Credit Wisely  Do not use too much credit at first.  It is important to have credit available when you need it.  The billing cycle is the time period during which you must make your monthly payment.  Try to save some of your earnings for future needs.  Unused credit is the difference between your credit limit and your current balance.

3. CONSIDER THE ECONOMY  During good economic times, interest rates are usually rising. Rather than buying on credit, this would be a good time to save money and earn interest on those savings.  When the economy is slowing down, jobs are scarce and some people are being laid off. People are buying less, prices may be dropping. This could be a good time to buy because you can get better values.

4. STUDY CREDIT OFFERS  You most likely will soon begin working. If you want to take advantage of one of these offers, carefully examine each one and compare the disclosure terms including  Interest rates  Grace period  Annual fee  Minimum finance charge  Transaction fees  Cash advance fees  Late fees and over-the-limit fees  Be sure to read all the fine print in any credit offer before accepting it – make sure your card can be cancelled at any time.

5. MANAGE YOUR DEBT LOAD  A debt load is the amount of outstanding debt at a particular time.  One rule says that installment loan debt should not exceed 20 percent of yearly take- home pay.  Another rule hold that you should be able to pay off all your debts within 30 days if absolutely necessary with all the cash you can raise.  Debt represents future earnings already spent – monthly payments that must be made in the future result in less money to spend for future needs.

6. AVOID UNNECESSARY CREDIT COSTS  To avoid credit costs, use cash to pay for small purchases and pay the full account balance every billing cycle.  Keep the number of credit cards and accounts you have to a minimum.  Comparison shop when getting a loan or credit card.  Consider special deals and financing arranged by the seller.  A sales finance company is a lender that makes loans for the purchase of consumer goods, such as cars or household appliances  A consumer finance company generally extends high-interest loans to consumers who may be ineligible for other types of lower-cost loans.  Use credit to take advantage of sale prices.  Time your credit purchases.  Take advantage of cash rebates and rewards.  Always pay your bill on time or early.

7. AVOID UNETHICAL LOAN PRACTICES  Unethical loan practices take advantage of people who can least afford to pay, Most states have laws that limit interest rates.  A loan shark is a person who offers illegal unsecured loans at very high interest rates. Unsecured loans are not backed by collateral.  Advance-fee loan is when a lender agrees to make a loan if the borrower pay a large upfront fee.  Equity stripping is the unethical practice of extending a loan to a distressed homeowner who cannot afford the loan payments, resulting in the lender taking possession of the home.  A deal that seems to be good to be true, probably is.

8. ASSIGNMENT  Answer questions 1-19 on pg. 373