1. © South-Western Educational Publishing Chapter 18 Responsibilities and Costs of Credit  Using Credit Responsibly  Analyzing and Computing Credit Costs

2. GOALS © South-Western Educational Publishing 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.

3. © South-Western Educational Publishing Responsibilities of Consumer Credit  Responsibilities to yourself  Responsibilities to creditors  Creditors’ responsibilities to you

4. © South-Western Educational Publishing Protecting Yourself from Credit Card Fraud Safeguarding Your Cards  Sign cards immediately.  Carry only cards you need.  Keep a list of cards and information about them.  Notify creditors when cards are lost or stolen.  Watch card during transactions.  Tear up any carbons.  Do not lend cards or leave them lying around.  Destroy expired cards.  Don’t give credit card information by phone to people or businesses you do not know.  Keep receipts and verify charges on statements.

5. © South-Western Educational Publishing 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.  Look for site seal of non-profit watchdog group.

6. © South-Western Educational Publishing Avoiding Unnecessary Credit Costs  Accept only the amount of credit that you need.  Make more than the minimum payment.  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.  Take advantage of rebate programs.

7. GOALS © South-Western Educational Publishing 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.

8. © South-Western Educational Publishing 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  Prime rate  Economic conditions  Business’s cost of providing credit

9. © South-Western Educational Publishing Computing the Cost of Credit  Simple interest formula  Annual percentage rate formula  Credit card billing statements

10. © South-Western Educational Publishing Simple Interest Formula I = P X R X T I=interest P=principal R=interest rate T=time

11. © South-Western Educational Publishing Annual Percentage Rate Formula APR = 2 X n X 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

12. © South-Western Educational Publishing Credit Card Billing Statements  Adjusted balance method  Previous balance method  Average daily balance method

13. © South-Western Educational Publishing ItemPriceAPR Interest Paid How Much You Really Pay for the Item Total Years to Pay Off TV$50018%$216$7165 Computer$1,00018%$516$1,5167 Furniture$2,50018%$1,415$3,91510 Cost of Making the Minimum Payment

14. © South-Western Educational Publishing Original Balance APR Monthly Payments Total Number of Monthly Payments Total Years to Pay Off Total of Payments $2,50018% Minimum Payment (MP) 12310$3,915 $2,50018%MP + $25504$3,258 $2,50018%MP + $50333$2,839 Benefit of Making More Than the Minimum Payment