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Chapter 18 Responsibilities and Costs of Credit

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1 Chapter 18 Responsibilities and Costs of Credit
MYPF CHAPTER 18 13-SEPT-2001 Chapter 18 Responsibilities and Costs of Credit Using Credit Responsibly Analyzing and Computing Credit Costs © South-Western Educational Publishing

2 Lesson 18.1 Using Credit Responsibly
MYPF CHAPTER 18 13-SEPT-2001 Lesson 18.1 Using Credit Responsibly Describe the responsibilities of consumer credit. Discuss how to protect your credit card from fraud. Explain how you can reduce or avoid credit costs. © South-Western Educational Publishing

3 Responsibilities of Consumer Credit
MYPF CHAPTER 18 13-SEPT-2001 Responsibilities of Consumer Credit Responsibilities to yourself Responsibilities to creditors Creditors’ responsibilities to you © South-Western Educational Publishing

4 Protecting Yourself from Credit Card Fraud
MYPF CHAPTER 18 13-SEPT-2001 Protecting Yourself from Credit Card Fraud Safeguarding Your Cards Sign cards. Carry only cards you need. Keep a list of cards. Notify creditors when cards are lost or stolen. Watch card during transaction. Tear up any carbons. Do not lend card or leave it lying around. Destroy expired cards. Don’t give credit card information by phone to people or businesses you do not know. © South-Western Educational Publishing

5 Protecting Yourself from Credit Card Fraud
MYPF CHAPTER 18 13-SEPT-2001 Protecting Yourself from Credit Card Fraud Protecting Your Cards Online Deal with companies you know and trust. Look for secure site symbol. Review privacy policy. © South-Western Educational Publishing

6 Avoiding Unnecessary Credit Costs
MYPF CHAPTER 18 13-SEPT-2001 Avoiding Unnecessary Credit Costs Accept only the amount of credit that you need. Do not increase spending as income increases. Keep the number of credit cards to a minimum. Pay cash for purchases under $25. Understand the cost of credit. Shop for loans. Use credit to beat inflation. Time your credit card purchases carefully. Take full advantage of rebate programs. © South-Western Educational Publishing

7 Lesson 18.2 Analyzing and Computing Credit Costs
MYPF CHAPTER 18 13-SEPT-2001 Lesson 18.2 Analyzing and Computing Credit Costs Explain why credit costs vary. Compute and explain simple interest and APR. Compare methods of computing finance charges on revolving credit. © South-Western Educational Publishing

8 Why Credit Costs Vary Source of credit Total amount financed
MYPF CHAPTER 18 13-SEPT-2001 Why Credit Costs Vary Source of credit Total amount financed Length of time you are making payments Ability to repay debt Type of credit selected Collateral or security offered Interest rates Economic conditions Business’s cost of providing credit © South-Western Educational Publishing

9 Computing the Cost of Credit
MYPF CHAPTER 18 13-SEPT-2001 Computing the Cost of Credit Simple interest formula Annual percentage rate formula Credit card billing statements © South-Western Educational Publishing

10 Simple Interest Formula
MYPF CHAPTER 18 13-SEPT-2001 Simple Interest Formula I  P  R  T I = interest P = principal R = interest rate T = time © South-Western Educational Publishing

11 Annual Percentage Rate Formula
MYPF CHAPTER 18 13-SEPT-2001 Annual Percentage Rate Formula APR  2  n  f P (N  1) n = number of payment periods in one year f = finance charge P = principal or amount borrowed N = total number of payments © South-Western Educational Publishing

12 Credit Card Billing Statements
MYPF CHAPTER 18 13-SEPT-2001 Credit Card Billing Statements Adjusted balance method Previous balance method Average daily balance method © South-Western Educational Publishing

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