Independent Living December 8, 2015

 What is a finance charge?  Explain the rule.  If a questions asks you to find the safe debt load, what are the proper math steps to do so?  What are the three borrowing fundamentals from the Debt Slapped video?  Math problem:  Harry is a monthly net income of $2, His fixed monthly expenses consist of $725 for rent. Harry’s outstanding student loan balance is $9,050 and has a $500 outstanding loan from purchasing a new broom two months ago. What is Harry’s safe debt load and how much more debt can Harry take on?

 Open-Ended Credit:  Enables borrower to use credit up to a stated limit  Closed-End Credit:  A loan for a specific amount that must be repaid in full, including all finance charges, by the specified due date  Service Credit:  A service provided which will be paid later

 As payments are made, the limit allows for more use of credit  Can be used again and again, as long as the balance does not exceed the credit limit  Types of open-ended credit:  Charge Cards  Revolving Accounts 

 The debtor (cardholder) is obligated and required to pay the balance in full by specified due date  Cannot incur interest charges and statement doen’t come with minimum payments  Not paid on time = hefty late fees and other penalties may apply  Often include rewards and rebates based on purchases  Percentage of dollar amount charged  Gift items of value

 Cardholder has the option of paying the balance in full by the due dates or making payments  Payment installments must be equal to or greater than stated minimum amount  Minimum payment will be based on amount due and set by creditor  Most all purpose cards are listed as revolving credit agreements  Only similarity to chard cards: offer reward and rebate programs

 Used to pay for big items  Cars, major appliances, real estate, etc.  Loan is take out then repaid in fixed payments that include principal and interest added  Product purchased with loan becomes automatic collateral to assure repayment

 Telephone and utility services are provided for a month in advance, then you are billed  Doctors, lawyers, hospitals, financial advisers: work on service credit  Terms are set by individual businesses

 Companies are required by law to record transactions on your account and send you a bill at the end of the billing cycle  Pay the bill in full at the end of the cycle, you avoid finance charges  Before selecting a credit card, be sure to review the following terms which affects the overall cost of the credit you will be using