Credit in our Economy Chapter 30: The Uses of Credit

In This Chapter You Will Be Able To : Describe three types of charge accounts: regular, budget, and revolving. List common types of credit cards. Explain how installment credit sales differ from credit card sales.

Chapter 30: Types of Charge Accounts and Teenage Charge Accounts Day 1 Notes

What are the types of charge accounts? A charge account represents a contract between the firm offering it and the customer. The three types of charge accounts are: – Regular account—a credit plan in which the seller expects payment in full at the end of a specified period (usually 25 – 30 days). Customers can purchase goods or services up to a fixed dollar limit at any time. Regular accounts are generally used for everyday needs. Regular account credit is commonly granted by those that provide a service – doctors, dentists, plumbers, etc.

What are the types of charge accounts? – Budget account—credit plan requiring that payments of a certain fixed amount be made over several months. Example: 12 month payment plan. You pay for your purchase in 12 equal monthly payments. Normally offered by utility companies, such as gas and electric. Helps to avoid large payments in winter/summer months.

What are the types of charge accounts? – Revolving account—credit plan that allows purchases to be charged at any time but requires that at least part of the debt be paid each month. This is the most popular form of credit. It is similar to the regular account. This is an example of the “typical” credit card. i.e. Visa, MasterCard, etc.. Finance charge—additional amount you must pay for using credit. Usually assessed if outstanding balance is not paid in full.

What are the characteristics of teenage charge accounts? Minors cannot be held liable for their personal debts, so generally a parent or guardian must agree to pay any balance due if the teenager does not. Charge accounts for teenagers have a limit on the amount that can be charged and is usually lower than ones put on adult accounts.

Chapter 30: Credit Card Usage and Installment Sales Credit Day 2 Notes

How are credit cards used? Credit cards issued today are multipurpose cards, such as VISA, Discover, and MasterCard that can used at various places. Most times, business sales increase if they accept credit cards. Travelers like credit cards because they do not have to carry as much cash with them.

What are the types of credit cards? The four types of credit cards are: – Bank Credit Cards –credit cards issued by a bank to those that have credit ratings that meet the bank’s standards. Example –Chase MasterCard When a card is used the business receives their money immediately. The customer receives only one monthly bill. – Travel and Entertainment Cards –used by business travelers. The most common travel and entertainment card is the American Express. Sometimes provide extra privileges when used. – Example –priority seating when traveling

What are the types of credit cards? – Oil Company Cards –credit cards issued by oil companies. Example – Mobil and Texaco They still exist, but were more popular when gas stations did not accept other cards. – Retail Store Cards –a credit card offered by a specific store and can only be used at the store that issues them. – Examples –Kohl’s, JC Penny, Best Buy, etc. Beneficial for businesses because if the customer has a credit card from their store, they know that they are more apt to shop there. Common incentives are discounts, reward points, and interest free periods (depending on dollar amount spent).

What is installment sales credit? Installment sales credit— issued by the seller that requires periodic payments at specified times. – Finance charges are added to the cost of the purchase and shown in the agreement. – You need to fill out a credit application at the time of the purchase and receive credit approval. – Under an installment credit plan you will: Receive and own the goods at the time of purchase. Make a down payment, which is a payment of part of the purchase price usually made at the time of the purchase.

Chapter 30: Consumer Loans and Credit Contracts Day 3 Notes

What are types of consumer loans? Types of consumer loans are: – Installment loan—the borrower agrees to make monthly payments in specific amounts over a period of time. The payments are called installments. – Secured loan—lender has the right to sell property used as collateral to get back the amount of the loan in the event the loan is not repaid. Collateral—property that is offered as security for some loan agreements. Cosigner—someone who becomes responsible for payment of the note if you do not pay as promised. Can be used for both, installment and secured loans.

What do you need to know about credit contracts? “KWYS”—Know What You’re Signing. Before signing an installment sales contract, consider these types of questions: – How much are the finance charges? – If you pay the contract within a specified period, will there be any finance charge? – Is the contract you are asked to sign completely filled in? – Under what conditions can the seller repossess the merchandise if you do not pay on time?