Presentation on theme: "Credit/Consumer Rights"— Presentation transcript:
1Credit/Consumer Rights Ch. 20Credit/Consumer Rights
2CreditReceiving something with the promise of payment at a later time.Principle: Actual cost of the good or service.Interest: Amount paid for the use of money.
3Charge AccountsBuy goods and services at individual stores and pay for them later.Credit limit: Maximum amount a person can buy with the promise of payment at a later time.Three types of accounts are installment, regular, and revolving.
4Types of Charge Accounts Installment AccountRepaid with equal payments over a certain period of timePart of the payment goes towards interest & part towards the principleCar loan or mortgageRegular AccountBilling cycles where a bill is sent at the endNo interest is charged if entire bill is paidAccount can’t be used again until the balance is paidInterest is charged on the balance not paidFurniture Stores usually do this. Pay by 2010, certain amount each month, but with no interest.Revolving AccountInterest charged on portion not paidAccount can still be used until credit limit is reachedExample: Credit Cards
5Credit and Debit cards Credit cards: Make purchases without cash. Used to purchase items and receive loans.Charge high interest rates (Avg. 18%) in the 1990’s.Lower interest rates if the customer is “reliable”.Debit Cards: Transfer funds electronically.Popular use in Automated Teller Machines (ATM’s)Now can be tied directly to checking accounts (check cards)
6Credit Cards Make purchases without having the money Charge high interest rates – 18%Lower interest rates if the customer is reliableFinance Charges – Cost of credit (interest) expressed in dollarsAPR – Cost of credit (interest) expressed as a percentage
7Applying for Credit Fill out application Credit Bureau does a credit checkCreditor may ask for referencesCredit checks show your income, debt and ability to pay debts in the past
8Credit Rating Rating of risk: Excellent, Good, Average or Poor Ratings have a number associated with them3 Credit Bureaus: Experian, Transunion & EquifaxGives lenders an idea of reliability when issuing loansHigher Credit Score = less interest you are charged on a loan = saving moneyUnsecured loans – loan based on reputationSecured loans – have collateral to back up the loan
10Government Regulations Equal Credit Opportunity Act: a person can’t be denied credit because of race, religion, national origin, gender, marital status or ageUsury Laws: Restrict the amount of interest companies, not banks, can chargeIn North Carolina, it is 8%. Lend neighbor $100 loan can only receive $8 from interest
11Bankruptcy Debts are so large they can’t be paid back Most of what a debtor owns is sold or given to creditorsTakes 10 years to reestablish creditStates can become bankrupt too
12Financial Institutions Commercial banks: Main functions are accepting deposits, lending money, and transferring funds.Savings and loan: Very much like commercial banks. Normally smaller banks.Savings banks: Original purpose was to help those overlooked by large banks. Sometimes charge higher interest rates.Credit Unions: Offer high interest on saving and low interest on loans. Must be a member to use their services.Finance Companies: Charge high interest rates. Used by those with bad credit history.
13Consumer RightsConsumer – someone who buys a product or service (YOU!)Types of IncomeDisposable Income – money remains after taxes taken out.Money to pay for house, car, etc.Discretionary Income – money remaining after paying for necessitiesEither save or spend it
14Consumer Rights cont.Consumerism – a movement to educate buyers on purchases and to make sure products are safeCongress laws – Pure Food and Drug Act in 1906Private groups – BBB or Better Business BureauConsumer Bill of RightsConsumers have…Right to a safe productRight to be informedRight to chooseRight to be heardRight to redress
15Consumer Responsibilities Smart Buying StrategiesInfo on productsWatch out for advertisingComparison shopping – find out prices on product from different stores/internetBrand Name vs. GenericWhen product failsReport itCheck the warrantyKeep a copy of recordsBe calmMake Fair complaintsEx.