Chapter 18 Responsibilities and Costs of Credit

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Chapter © 2010 South-Western, Cengage Learning Responsibilities and Costs of Credit Using Credit Wisely Costs of Credit 18.

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Presentation transcript:

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

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

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

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

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

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

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

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

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

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

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

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