1. Consumer Credit Selena Lanter-Mason/ Kerrie Kocs

2. What is Consumer Credit? Credit is an arrangement to receive cash, goods, or services now and pay for them later Consumer Credit: is the use of credit for personal use Common forms of consumer credit are credit cards, merchants may also provide financing for products they sell, banks may directly finance products through loans and mortgages A financial institution, merchant, or individual can be a creditor which is an entity that lends money Good credit is valuable and you need to use wisely or it will lead to extreme debt

3. Credit Uses and Misuses Many good reasons to use credit: maybe you can buy something on credit now and pay for it later It is not good to use credit if you cannot afford high monthly payments Using credit increases the amount of money you can spend now, but decreases amount of money you will have later to spend When credit is misused it can result in default, bankruptcy, and loss of creditworthiness

4. Factors to Consider Before Using Credit Before deciding to make a major financial purchase using credit ask yourself: Do you have the cash you need for a down payment? Do you want to use your savings instead of credit? Can you afford the item? Could you use the credit in a better way? Could you put off buying the item for a while? What are the opportunity costs of postponing the purchase? What are the costs of using credit? When you buying something on credit, you are also agreeing to pay the fee a creditor adds to the price purchase. Make sure the benefits of making a purchase now outweigh the costs of credit

5. Advantages of Credit Advantages: It lets you enjoy goods and services now and pay for them later Allows you to combine several purchases to make just one monthly payment If you are making a hotel reservation, renting a car, or shopping online you will most likely use a credit card. Using this credit allows you to record your expenses It is also safer to travel without a lot of cash Also, if you use wisely other lenders will view you as a responsible person

6. Disadvantages of Credit The greatest disadvantage is the temptation to buy more than you can afford Using credit to buy things you cannot afford can lead to serious trouble If you fail to repay a loan, or a credit card balance you can lose your good credit reputation and you may also lose some of your income and property Using credit does not increase your total purchasing power and if your income does not increase you may have trouble paying bills APPROACH CREDIT WITH CAUTION

7. Closed-End Credit Closed-end credit: is credit as a one-time loan that you will pay back over a specified period of time in payments of equal amounts. An agreement lists the repayment items including: number of payments, payment amounts, and the total cost of credit A mortgage is a common type and so are vehicle loans and installment loans The lender will hold the title showing the ownership to the item until all payments have been made. The most common types are instalment sales credit, installment cash credit, and single-lump credit. Installment sales credit: is a loan that allows you to receive merchandise and you make a down payment Installment cash credit: is a direct loan for personal purposes and you may not make a down payment Single-lump credit: is a loan that must be repaid in total on a specified loan

8. Open-End Credit Open-end credit: is a credit as a loan with a certain limit on the amount of money you can borrow for a variety of goods and services A line of credit: is the maximum amount of money a creditor will allow you to borrow Department and bank credit cards are examples After a company has approved your application for credit and you have gotten the card you can make purchases as long as you don’t exceed your line of credit Then you are billed periodically for partial payments Revolving open-end credit: prearranged loan for a specified amount that you can use by writing a special check and repayment is made in installments over a period of time Revolving Open End Credit-This type of consumer credit is found with most credit cards. The pre-approved amount will be set out in the agreement between the lender and the borrower.

9. Sources of Consumer Credit Loans: borrowed money with an agreement to repay it with interest within a certain amount of time There are different types of loans Inexpensive loans: Parents or other family members can give you inexpensive loans or loans with low interest Family may only charge you the interest they would have earned on the money they had deposited in a savings account. This could complicate family relationships.

10. Continued Other types of loans are medium-priced loans, expensive loans, and home equity loans. Medium priced loans: These are loans with moderate interest that often are obtained from commercial banks, savings and loan associations, and credit unions. Expensive Loans: Loans from finance companies and retail stores that lend to consumers. They often will charge high interest rates, ranging from 12 to 25 percent. Banks also lend money to cardholders through cash advances which are loans that billed to customer’s credit card account. Home-equity loans: This is a loan based on your home equity or the difference between the current market value of your home and the amount you still owe on the mortgage. Only use these loans for major items such as medical bills and education because these loans come from tax-deductibles.

11. Sources of Consumer Credit Credit cards are an extremely popular form of consumer credit. There are two types of cardholders, the people who pay off their balances in full each month known as convenience users. Cardholders who do not pay off their balance every month are borrowers. Majority of credit card companies offer a grace period or a time period during which no financial charges will be added to your account. A finance charge is the total dollar amount you use to pay credit. If you pay your balance before the date on your monthly bill says you do not have to pay a finance charge. Borrowers who carry their balances past grace period will have to pay finance charges. The cost of every credit card is different and terms set forth by the lender.

12. Types of Credit Cards Debit Cards: These allow you to electronically subtract money from your savings or checking accounts to pay for goods or service. Co-branding: This is the linking of a credit card with a business trade name offering “points” or “premiums” toward the purchase of a product or service. These offer rebates on products and services. Example: Venture Card Smart Cards: This is a plastic card equipped with a computer chip that can store 500 times as much data as a normal credit card. Stored-Value Cards (Gift Cards): They use technology to store information and track funds and they are prepaid. Travel and Entertainment Cards: Not really credit cards because the balance is due in full each month and users do not pay for items when they purchase them.

13. ACTIVITY https://www.youtube.com/watch?v=jxFckwpbOps http://www.igrad.com/games/credit-card-simulator.aspx