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4 Americans And Credit
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4 Americans And Credit


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  • 1. Objective: Analyze how buying on credit affects you and the economy
  • 2.
    • 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
  • 3.
    • 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
  • 4.
    • 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 before you make a decision
  • 5.
    • Commercial Banks- main business checking, savings, and loans
    • Savings and Loan Associations- like a bank except no checking
    • Savings Banks- Like the first two except smaller
    • Credit Unions- is owned and operated by its members and offer competitive rates
    • Finance Companies- makes loans to customers on behalf of stores
  • 6.
    • Regular Charge Accounts- is in store credit that must be paid in full within 30 days
    • Revolving Charge Accounts- is in store credit that allows you to continue to charge as long as you make monthly payments
    • Installment Charge Accounts- You make equal payments until it is paid off you are not allowed to charge again until your account is paid in full
  • 7.
    • 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.
  • 8.
    • Several factors affect your creditworthiness
    • Your credit Rating- how you handle credit
    • Capacity to Pay- how much debt do you have versus how much you make
    • Character- your reputation
    • Collateral- is money, cars, homes
    • Secured Loans- are loans that are backed up by collateral
    • Unsecured Loans- have no collateral
  • 9.
    • Truth in lending act (1968) Ensures that consumers are fully informed about costs of borrowing
    • Fair Credit Reporting Act (1970) Protects privacy and accuracy of your credit report
    • Equal Credit Opportunity Act (1974) prevents discrimination when applying for credit
    • Bankruptcy- is when you can’t repay your debt; it ruins your credit for ten years and you lose all of your stuff
  • 10.
    • What is Credit?
    • Ans. is receiving funds today for items; you will repay the money in the future
    • What is principal?
    • Ans. The amount you borrowed
    • What is interest?
    • Ans. The amount you pay for borrowing
    • What is disposable income?
    • Ans. Money left over after taxes