2 Credit Objectives:Define credit and indicate three factors that affect the interestName different groups in our economy that use creditIdentify three advantages and disadvantages of using creditName places where you can get credit and list the three different types of credit cards
3 What is credit? A promise Buy now—pay later. A contract between Vocabulary: Credit, Creditor, Debtor,
4 Credit Serves four (4) functions in our economy Stabilizes the economy allowing for purchases (Buy now and pay later)Promotes Business Growth – allows for new businesses to formExpands Production – business can purchase new capitalRaises the standard of living – as a consumer you have more assets because of credit
5 IMPORTANCE OF CREDIT (Why do you need credit?) Car loan, mortgage, student loan etc.UtilitiesInsuranceRenting
6 PROS and CONS Advantages Convenient Establishes credit history EmergenciesRisks with carrying cashPurchasing onlineHelps economy grow
7 DISADVANTAGES Costs are attached to using credit Misuse – many people are not disciplined when using creditMay lead to a Lower credit rating if you can not stop spendingCredit FraudTOO MUCH DEBT!!!!!
8 Factors to Consider Before Using Credit Is a Down Payment required?Can I use Savings?Can I really afford it?Use credit now?Or Wait to buy laterWhat are the Costs involved?
9 Sources of Credit Credit Cards Single-Purpose Cards (Revolving) Examples:Multipurpose Cards (Revolving)ExamplesTravel and Entertainment (Regular)RevolvingUnsecured – not guaranteed by other property or cashHigher RatesSecured – where property or cash is pledged for an assetCollateral
10 Banks offer Credit Single-Payment Loan (seasonal businesses) Installment Loan –When would I use…Mortgage LoanPurchase a Home
11 Other Sources of Credit Seller-Provided CreditBuying FurnitureExamples:Consumer Finance CompaniesFor People who have _______Payday Advance ServicesUsed to cash checks & get loansPawnshops
13 Chapter 26 – How to Get and Keep Credit What I need to know…
14 Developing a Credit History Without a HistoryBanks will not loan you money and/orYou will pay very high interest ratesWays to begin developing a Credit HistoryOpen a Checking and Savings AccountGet a Debit CardApply for a Secured Credit CardCharge Small balances and pay bill in full each monthNOTE: IF YOU HANDLE THE ABOUT RESPONSIBLY THEN…
15 Developing a Credit History You will have a good chance of getting a car loan, mortgage or a personal loanBEFORE APPLYING FOR A LOANCheck your Credit Report – fix discrepanciesBring the following when applying for a loan:PROOF OF INCOME: Pay stubs, tax reports, bank statements, or any other proof of incomePROOF OF IDENTITY: Social Security Number and Driver’s LicenseIf they feel you are not credit worthy you may need a Cosigner