Credit 25.1.

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Presentation transcript:

Credit 25.1

Q: What does the word credit mean?

· Q: Who are creditors? A: Q: Who are debtors?

Q: What is an interest charge? Q: What is a finance charge?

· There are two types of credit: secured and unsecured Q: What is unsecured credit? A: Q: Can anyone think of examples of this type of credit?

Q: What is secured credit? Q: Can anyone think of examples of this type of credit?

· If you don't make the required payments on your loan, you will be in default and lender can take the collateral Today many stores and banks issue credit cards. Sometimes there are fees associated with these cards so you need to shop around.

You will be sent a monthly statement that will tell you how much you owe and what the minimum payment is that you must make. Beware! If you only make the minimum payment, you will have to pay interest on the balance that you carry over. Q: So, how do you know what the monthly interest rate is that you will be charged? The percentage rate. The annual percentage rate is then broken down into a monthly rate. Let's do a problem to see how interest can add up and get into even deeper debt

APR = 18% 1.5% per month $600 bill You make the minimum payment, so now you owe interest .015 x $500.00 = $7.50 So, next bill will be $507.50 + new charges So, when deciding which credit cards to maintain or apply for, you should always find out the annual fee and the APR

Q: What happens if someone steals your credit card? You will not be responsible for any unauthorized charges made after you notified the company that your card has been stolen The law limits your liability to $50 for any charges made before you notified them of the missing card If your card isn't used but the thief got your credit card number and made unauthorized charges, you aren't responsible for any of those charges

Q: What happens if someone steals your debit card? In contrast to a credit card, your liability for a lost or stolen debit card depends on how quickly you notify your bank. If you notify your bank within 2 days of the discovery, you can't be charged more than $50. If you notify your bank within 60 days, your liability is limited to $500 If you wait until after 60 days, your potential loss is unlimited.