Practical economics student1


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  • Federal law states that everyone has the right to get one free credit report every 12 months from each of the major credit reporting companies - Equifax, Experian and TransUnion
  • Practical economics student1

    1. 1. PRACTICAL ECONOMICS Consumerism & Credit
    2. 2. Consumerism Notes <ul><li>Consumerism – movement to educate buyers about the purchases they make and to demand better and safer products </li></ul><ul><li>Consumer is any person or group that buys or uses goods/services to satisfy their needs/wants </li></ul><ul><li>Consumer Rights </li></ul><ul><ul><li>1. the right to safety – protection against goods & services that are dangerous </li></ul></ul><ul><ul><li>2. right to be informed – info for protection against fraud & to make good choices </li></ul></ul><ul><ul><li>3 . the right to choose – need markets to be competitive </li></ul></ul><ul><ul><li>4. right to be heard – consumer interests must be heard when creating new legislation </li></ul></ul><ul><ul><li>5. right to redress – ability to obtain payment from businesses for financial or physical damages caused by products </li></ul></ul>
    3. 3. CREDIT
    4. 4. What is it? <ul><li>Definition – </li></ul><ul><ul><li>Receiving funds to buy goods & services today with the promise to pay for them in the future </li></ul></ul><ul><ul><li>**Taking out a loan is the same as buying on credit!** </li></ul></ul><ul><li>Amount owed = principal (original amount) + interest (cost of borrowing) </li></ul>
    5. 5. Why people use it? <ul><li>1. Convenient/safe to use rather than using cash </li></ul><ul><li>2. Don’t have the $$$ yet but can’t wait to buy it! </li></ul><ul><li>3. Payments spread out over time is more attractive </li></ul><ul><li>4. helps you to build a positive credit history </li></ul>
    6. 6. Type of Credit = Installment Debt <ul><li>Definition – </li></ul><ul><ul><li>Debt that is repaid over time in equal payments (installments) </li></ul></ul><ul><ul><ul><li>Longer the installment = lower payments but then there are higher interest rates! (think in terms of trade-offs!) </li></ul></ul></ul><ul><ul><li>Most popular form of installment debt is a mortgage </li></ul></ul><ul><ul><ul><li>A mortgage is installment debt owed on real property (houses, buildings, land, etc.) </li></ul></ul></ul>
    7. 7. Financial Institutions that Provide Credit <ul><li>Commercial Banks – major banks who accept deposits, lend money, and transfer funds </li></ul><ul><li>Savings & Loan Associations – accept deposits and lends, usually offers lower interest rates </li></ul><ul><li>Savings Banks – usually serves smaller savers </li></ul><ul><li>Credit Unions – union members own and operate these unions to provide savings accounts and low interest loans </li></ul><ul><li>Finance Companies – Company that takes over installment debts from stores & then charges higher interest rates </li></ul>
    8. 8. Other Ways of Receiving Credit – Charge Accounts & Credit Cards! <ul><li>1. Charge Account – allows a customer to buy goods or services from a specific company and pay for them later </li></ul><ul><li>2. Credit Card – allows a person to make purchases without paying cash and then paying later </li></ul><ul><li>3. What’s the difference??? </li></ul><ul><ul><li>- A charge account allows you to make purchases at ONE STORE while a credit card allows you to make purchases at MULTIPLE BUSINESSES </li></ul></ul>
    9. 9. Other Ways of Receiving Credit – Charge Accounts & Credit Cards! <ul><li>4. Debit vs. Credit </li></ul><ul><ul><li>- Debit is not borrowing money . Instead, it is just a convenient way of making cashless purchases which electronically transfers the money from your banking accounts to the business your are purchasing from </li></ul></ul><ul><li>5. </li></ul><ul><ul><li>Finance charges – cost of credit that combines interest costs with other charges connected to credit </li></ul></ul><ul><ul><li>APR – Annual percentage rate is the cost of credit expressed as yearly percentage (takes into account interest rates & other costs such as membership fees) </li></ul></ul>
    10. 10. Which card is best for you? <ul><li>When shopping for a CC, consider: </li></ul><ul><li>-annual fees </li></ul><ul><li>-intro and standard APR (annual percentage rate) </li></ul><ul><li>-grace period </li></ul><ul><li>-credit limit </li></ul><ul><li>-late fees / other fees </li></ul>
    11. 11. IMPORTANT: CREDIT REPORT <ul><li>Credit Check – </li></ul><ul><ul><li>**A way to determine if a borrower will be able to repay their loans** </li></ul></ul><ul><ul><li>The check evaluates a person’s income, current debts, personal life, past history of borrowing and repaying debts to determine their credit rating/score (represents their creditworthiness) </li></ul></ul><ul><li>Credit Rating/Score (is in your Credit Report) – </li></ul><ul><ul><li>rating of risk involved in lending money to a specific person or business </li></ul></ul><ul><ul><li>YOU WANT YOUR RATING/SCORE TO BE HIGH! </li></ul></ul>
    12. 12. Credit Score Ranges