CreditAdvantages

• Improved standard of living

CreditAdvantages

• Improved standard of living• Convenience and safety

CreditAdvantages

• Improved standard of living• Convenience and safety• Help in emergencies

CreditAdvantages• Improved standard of living• Convenience and safety• Help in emergencies• Help in record keeping

CreditAdvantages• Improved standard of living• Convenience and safety• Help in emergencies• Help in record keeping• Forced savings (for some)

CreditDisadvantages• Interest charges and fees

– Grace period– Universal default

• Late payments• Over limit• Too much debt / available credit• Too many credit inquiries / new car loan

CreditDisadvantages

• Interest charges and fees• Increased impulse buying

CreditDisadvantages

• Interest charges and fees• Increased impulse buying• Financial problems

– Bankruptcy

Which of the following is not an advantage of credit?

A. Improved standard of livingB. Help in emergencies if purchase is necessaryC. Interest charges and fees associated with

creditD. Help with record keepingE. Convenience

Which of the following is not an advantage of credit?

A. Improved standard of livingB. Help in emergencies if purchase is necessaryC. Interest charges and fees associated with

creditD. Help with record keepingE. Convenience

What do you think?Discussion

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• Many people say that credit is the American way. How has credit helped Americans live better lives?

• Do you know anyone who doesn’t use credit at all? How does he or she get by?

• Do you think credit is good or bad?

CreditFraud and Identity Theft

• Credit fraud

CreditFraud and Identity Theft

• Credit card fraud• Identity theft

John A. DoeTimothy B. Jones

Credit Identity Theft Tips

• Don’t give out your Social Security number unless absolutely necessary (give last four digits only).

Credit Identity Theft Tips

• Don’t give out personal information to strangers on phone or over Internet.

Credit Identity Theft Tips

• Remove mail from mailbox as quickly as possible (hold mail if going to be gone).

Credit Identity Theft Tips

• Carefully examine all bills that come in mail / e-mail.

Credit Identity Theft Tips

• Use shredder to destroy personal information.

Credit Identity Theft Tips

• Don’t allow others to look over your shoulder or watch you usecredit / debit /ATM cards(skimming).

Credit Identity Theft Tips

• Always keep wallet safely in pocket (buttoned) or purse (securely closed).

Credit Identity Theft Tips

• Keep all receipts and check against credit card / bank statement for transactions you didn’t make.

Credit Identity Theft Tips

• Use secure Web sites if you must send credit or personal information over Internet.

Credit Reporting Identity Theft

• Notify authorities.• Notify creditors.• Don’t pay bills you suspect are fraudulent.

Which of the following is not a suggestion to help with identity theft?

A. Cut up outdated credit cards.B. Shred documents that contain personal

information.C. Don’t give out Social Security number unless

absolutely necessary.D. Destroy all receipts as soon as possible.E. Securely store wallet.

Which of the following is not a suggestion to help with identity theft?

A. Cut up outdated credit cards.B. Shred documents that contain personal

information.C. Don’t give out Social Security number unless

absolutely necessary.D. Destroy all receipts as soon as possible.E. Securely store wallet.

What do you think?Discussion

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• Do you know anyone who has had his or her identity stolen? How did he or she deal with it?

• What tips do you think are most important to protecting your identity?

• What tips would you add to the list?

Types of Credit Short-Term Credit• Service credit• Installment credit• Credit cards

Types of Credit Short-Term Credit• Credit vs. charge card

– Minimum payment vs. full payment– Annual percentage rate

(APR)

Other CardsNot Credit Cards• Debit cards• Prepaid cards• Gift cards

Credit CardsSafeguarding Cards• Cut up expired cards.• Sign backs of cards.• Carry only one or two cards.• Photocopy both sides for records.• Retrieve cards after transactions.• Don’t let others borrow cards.

LoansTypes of Loans• Personal loans

– Secured (collateral)– Unsecured loans

LoansTypes of Loans• Auto loans

LoansTypes of Loans• Student loans

LoansTypes of Loans• Home loans (mortgage)

– Fixed vs. variable rate• Home equity loans

– Usually variable rate tied to prime

LoansTypes of Loans

• Consolidation loans

LoansSources of Loans

• Banks• Credit unions• Savings and loans (mutual savings banks)• Consumer finance companies

LoansSources to AVOID!

• Credit card cash advances• Refund anticipation loans• Payday loans• Pawnshops• Loan sharks

– Rate limit varies by state

Do you want cash back?

YES NO

Which of the following would be the most expensive source for a loan?

A. Payday loan B. Reputable bankC. Credit unionD. Savings and loanE. Consumer finance company

Which of the following would be the most expensive source for a loan?

A. Payday loan B. Reputable bankC. Credit unionD. Savings and loanE. Consumer finance company

What do you think?Discussion

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• Why would someone take a payday or other high-interest loan? What alternatives should she or he consider?

• What do you think about taking a loan for your tax refund before you receive it? Is that a good way to purchase something now that you really want?