1. Welcome Back. Week at a Glance Ch
Welcome Back! Week at a Glance Ch. 2 Savings – Fill in the blanks Introduction to CREDIT Turn and Talk – Ask a classmate “What will be your first three debt” purchases? End of hour: Check your grades

2. Different Strategies / Goals
Traditional “Normal”
Dave Ramsey
Good Debt / Bad Debt
Everybody has it
Types of Loans
Cost of Borrowing
Credit Cards
FICO (Credit Score)
You do not need to use credit
Pay cash
Save until you can afford
You do not have to build a credit rating (FICO)
The credit is a product, marketed for a profit
Chapter 18

3. Credit gets you a Loan which puts you in Debt
TODAY:
Remember….
What is Credit?
NOTES on the back of your lesson plan…
Dave’s side:
FOUNDATIONS book  page 76-81
Tomorrow: Gay Pustaver, Money Management Counselor
Credit is the GRANTING of a LOAN to go into DEBT.
Good Credit Rating = lower down payments & lower interest rates.
Loans: Principal + Interest
Debt is your obligation to pay
LOANS are …
Bank Installment Loans
Credit Cards (Revolving)
“Bills” (Regular / Budget)
Chapter 18

4. TYPES OF CREDIT Sales credit (Credit Cards) Consumer Loan credit
Installment Loans – Secured (Collateral)
(Like for cars, houses, etc.)
Single Payment Loans – Unsecured/Secured
Trade credit (Used by businesses)

5. Consumer Credit Credit Fundamentals
Uses of Credit – GOOD credit / BAD credit
Cost of Credit – Interest, Fees, etc.
Credit Applications and Documents
Credit CARD Act of 2009
Protection of your Credit Rights

6. The 3 C’s of Credit Character – who are you? Capacity –
Stable? Job Jumper? Criminal Record?
Capacity –
What’s your income?
What are your debt obligations already?
Do you have a positive cash flow?
Collateral – what do or will you have of value to secure this loan
Chapter 29

7. BENEFITS OF CREDIT Convenience Immediate possession
Savings (Great deals!)
Credit rating
Useful for emergencies
Chapter 29

8. CREDIT CONCERNS Overbuying Careless buying
Higher prices (because you don’t pay off the loan/card and pay finance charges on your purchases)
Overuse of credit – Getting in over your head!
Chapter 29

9. All kinds of CHARGE ACCOUNTS ! ! !
Consumer Loans
All kinds of CHARGE ACCOUNTS ! ! !
Regular accounts (Doctors, Dentists, Plumbers)
Budget accounts (Utilities, Insurance, etc.)
Revolving accounts (Credit Cards)
Credit limit
Monthly Payments
Finance charges
Buy Stuff…Pay Debt…Buy Stuff…Pay Debt
Chapter 30

10. CREDIT CARDS Bank cards (VISA, MasterCard, Discover)
Consumer Loans
CREDIT CARDS
Bank cards (VISA, MasterCard, Discover)
Travel and entertainment cards (AmExpress)
Oil company cards (BP gas)
Retail store cards (Younkers, Kohls, etc.)

11. Consumer Loans
INSTALLMENT CREDIT
Signing a sales contract that shows the terms of the purchase
Receiving the purchased item at the time of the sale
Making a down payment
Paying a finance charge on the amount owed
Making regular payments at stated times

12. Secured Loans Auto Loans Mortgage Home Equity (2nd Mortgage)
$200,000 home – OWE $120,000
$80,000 in EQUITY in the home
Borrow up $40 - $60,000 BACK on the mortgage = Home Equity loan
Chapter 18

13. What are INTEREST rates? YouTube 7minutes
CHAPTER 18
5/13/2018
What are INTEREST rates? YouTube 7minutes
EARN or PAY? Debt=PAY
TODAY
Interest  Finance Charges
Annual Percentage Rate (APR)
PAY:
Auto: 3.25%-4%
Mortgage: 3%-4%
Credit Cards: 13%-28%
Oprah’s Debt Diet
In review…and the Eggleston’s $43,521 in CREDIT CARD DEBT
Deadline for make-up work … Jan-February checking transactions.
Interview your parents

14. FINDING INTEREST Principal, P Amount of the loan Interest Rate, R
Percent of interest charged or earned
Time, T
Length of time for which interest will be charged, usually expressed in years or parts of a year

15. SIMPLE INTEREST
Interest 
Principal 
Rate
Time I  P  R T

16. SIMPLE INTEREST EXAMPLES P  R T
One year
$100
.12 1
$12
Two years 2
$24
One month
1/12 $1
60 days
60/360 $2

17. Credit Application and Documents
Personal Finance Statement
Your assets, liabilities and equity
Credit bureau report: Equifax, Trans Union,
Credit Score
Chapter 32

18. Credit Card Statements (Witte’s C1)
Credit Memo – returned something? Keep the credit slip until it “posts”
Debt Consolidation
Throw it all into one bucket and make one payment.
Chapter 18

19. Schumer Box – Good News Bad News Handout
APR on Cash Advances (higher rate)
Defaults on payments (higher rate)
Grace Period
Late Payment Fees
NSF Fees
Over the Credit Limit Fees
Annual Fees
Chapter 18

20. Questions to ask yourself before using credit…
How will I benefit from this use of credit?
Is this the best buy I can make or should I shop around?
What will be the total cost of my purchase, including the finance charges?
What would I save if I paid cash?
Will the payments be too high for my income?
Chapter 29

21. CREDIT SCORES How it all starts: Loan Approvals Loan RATES
Checking Account
“Life Bills”
Job History
Why it’s Important
Loan Approvals
Loan RATES
Loan “down payments”
JOBS! (Some employers check credit scores before hiring)
When does it start?
Right now…

22. USING CREDIT Credit – Money you borrow (principal)
Debtor – Who OWES the money
Creditor – Who LENT the money

23. Cost of Credit Goals Calculate interest in consumer credit situations.
Explain finance charges when using credit.
Chapter 31

24. Amortization Schedules
Chapter 18

25. And now….. 12 Credit Cards totaling Remember….. TEST tomorrow!
over $43,000
Remember….. TEST tomorrow!
Use your “book”
Study your STUDY guide
Oprah: How to Play the Credit Card Game

26. >> C H E C K P O I N T
What are potential drawbacks of buying on credit?

27. >> C H E C K P O I N T
What are the main advantages of using credit? (Going into debt)
Chapter 29

28. >> C H E C K P O I N T
What three things are necessary to calculate interest?

29. >> C H E C K P O I N T
What does APR represent?

30. INSTALLMENT INTEREST Decreasing loan payments Level loan payments
Chapter 18

31. Identify your “WORTH” How do you keep organized? An 8 pocket portfolio
Assets – Liabilities = Net Worth
What’s your FINANCIAL plan?
Developing a FINANCIAL portfolio
Debt to Equity Ratio and Debt to Income Ratio (Low is good)
How do you keep organized?
An 8 pocket portfolio
Electronics/Auto/Loans/School/Taxes/
Piles and piles and piles of mail….shoebox?
Chapter 18

32. LEVEL LOAN PAYMENTS
Chapter 18

33. Key Terms
credit application
credit bureau

34. CREDIT APPLICATION PROCESS
The three Cs of credit
Character
Capacity (cash flow)
Capital (collateral)
Credit applications
Documenting credit data
Actions to establish credit

35. >> C H E C K P O I N T
What are the three Cs of credit?

36. CREDIT BUREAUS Gather information on credit users
Sell information to businesses offering credit, such as banks, finance companies, and retail stores
Creates a credit report showing debts owed, how often credit is used, and whether debts are paid on time

37. Things to do NOW Good grades and attendance
Savings Account – Make regular deposits
Checking Account – keep it straight!
Retail or Bank Credit Card – Small!
Employment – Stability

38. >> C H E C K P O I N T
What is the main purpose of a credit bureau?

39. Key Terms
credit counselor (IE: Gay Pustaver)
bankruptcy

40. CREDIT APPLICATION REGULATIONS
Truth-in-Lending Law of 1968
Equal Credit Opportunity Act

41. Credit Card Act of 2009
No more cards for year olds! (Unless there’s a cosigner)
Can’t raise rates on previous purchases
Must apply payments to charges oldest to newest. (NOT to the lowest interest rate purchases)
Statements must show “if you only pay the minimum – this is what it will cost you…”
Opt In or Out --- You must tell them that you want to OPT OUT of transactions that would put you over your limit!
Late Fee Trap – Extends time to pay to at least 21 days.

42. >> C H E C K P O I N T
How does the Truth-in-Lending Law assist consumers?

43. CREDIT USE REGULATIONS
Fair Credit Billing Act
Fair Credit Reporting Act

44. >> C H E C K P O I N T
What is the purpose of the Fair Credit Reporting Act?

45. CREDIT PROBLEMS AND ASSISTANCE
Credit Counseling
Bankruptcy

46. Protection of Credit Rights
Goals
Identify credit application regulations.
Explain credit use regulations.
Discuss credit problems and available assistance.

47. >> C H E C K P O I N T
What actions can a person take when facing credit problems?