Name ___________ Date____________

Credit and Debt-Personal Finance pg 512-515

Define any 3 black terms1. 2. 3.

Warm up

• What are 3 SPECIFIC THINGS YOU KNOW ABOUT CREDIT CARDS??

• Do you know a story about someone who had credit card issues?

• Write a few notes about what happened?

What is Credit?

• Loans, credit cards, and other methods of deferred payments are known as credit. YOU PAY “INTEREST” ON CREDIT CARDS!! “INTEREST” KEEPS POOR PEOPLE POOR AND THE WEALTHY, WEALTHY!!!

• CREDIT CARD DEBT WILL CATCH UP WITH YOU!!!

Who are Creditors?

• Are the people who lend you money.

• Example: banks, credit unions, VISA, MasterCard, Discover, American Express, Car dealerships,

THE ONLY FINANCIALLY SMART LOAN

mortgage loans to buy a house and student loans (only for tuition and books)

The Four C’s

• Creditors look for

• capacity,

• capital,

• character,

• collateral. 

•Capital: your regular income plus the money in your savings and checking accounts.

•Capacity: ability to pay the debt. Ask questions like how long have you worked at you job? How much money do you make?

•Character: willingness to repay the debt. Will obtain record of payment history and past borrowing.

•Collateral: Some loans require collateral, which is property, used to secure a loan. If you fail to pay loan creditor will take collateral. Examples: Car or House

Law Equal Credit Opportunity Act

Creditors cannot use age, gender, race, color, marital status, religion, national origin to

discriminate against people applying for credit.

4 Steps to Establishing Good Credit

• 1. Maintain savings and checking accounts.

• 2. Get 1 credit card or debit card

• 3. Use your bank deposit as collateral for a credit card

• 4. Have someone with good credit cosign your credit application

What are Finance Charges?

• You will have to eventually pay back the money you borrowed PLUS fees and interest.

• Creditors can apply fees for borrowing their money

• Finance charges can be expensive and add up quickly!

ALWAYS AVOID!• Avoid making late payments, over

borrowing and spending, protect your cards from loss or theft.

Types of Credit

• Loans: There are two types single and installment.

• Single Loan payments: are short term and paid off in one lump sum

• Installment loan payments: are repaid at a regular scheduled intervals or installments. Monthly

Credit Cards: Lets you borrow money on an ongoing basis, up to a prearranged amount, to buy

any goods or services. Any amounts you pay back you can reborrow.

Tips on choosing a Credit Card

• Low APR rate

• APR fixed or variable

• See what the periodic rate is: interest rate applied to your account balance each billing period

• See how finance charges are computed

Tips on choosing a Credit Card (continues)

• WHAT IS THE INTEREST RATE 10%, 20%, 30%???

• WHAT IS THE ANNUAL FEE??

• Ask what OTHER fees the creditor charges

Finance Charges and Terms

• Annual Percentage Rate (APR): Tells you what your credit will cost. It is the finance charge expressed as an annual rate.

• Terms: length of your loan

Truth in Lending Law: Protects the lender. Creditors must disclose their finance charges, fees, APR, monthly charges, and the method of finance charge calculation.

Page 515 Credit and Debt Assignment

• Page 512 define or explain 3-5concepts/ things you learned on page 512.

• Page 513 define or explain 3-5 concepts/things you learned on page 513

• Page 514 define or explain 3-5 concepts/things you learned on page 514

• Page 515 define or explain 3-5 concepts/things you learned on page 515

• OR YOU CAN WRITE A 3-5 SENTENCE PARAGRAPH FOR EACH PAGE!!!

Check your understanding pg. 515

• 2. Analyzing Information: Analyze the credit card offers your household receives in the mail or that you see advertised. Make a chart comparing their features and finance charges. Identify and explain which credit card is the best deal.