1. Credit 8.01 Evaluate various sources of credit available to the government, business, and consumers. T008.01.01 G3

2. Who uses Credit? Consumer Credit  Credit used by people for personal reasons. Commercial Credit  Credit used by businesses. T008.01.02 G4

3. Types of Credit Charge Accounts – most common type of short- term or medium-term credit.  Regular Charge Accounts Require that you pay for purchases in full within a certain period of time.  Revolving Charge Accounts Allows you to borrow or charge up to a certain amount of money (credit limit) and pay back a part or the entire balance each month.  Budget Charge Accounts Allows you to pay for costly items in equal payments spread out over a period of time. T008.01.03 G5

4. Credit Cards Single-Purpose Can only be used to buy goods or services at the business that issued the card. Examples: JC Penney, Sears Multipurpose Similar to a revolving charge account. May be used at several locations. Examples: Visa and Master Card Travel and Entertainment Similar to regular charge accounts. Must be paid in full each month. Example: American Express T008.01.04 G6

5. Banks and Other Financial Institutions Single Payment Loan  Debtor pays off loan in one payment.  Promissory Note Written promise to repay with interest. Installment Loan  Repaid in regular payments. T008.01.05 G7

6. Installment Loans Types:  Student, mortgage, automobile, etc. Secured vs. Unsecured  Secured loans are backed by collateral (help guarantee the repayment of a loan). Closed vs. Open Ended  Closed-end credit is used for a specific purpose and involves a definite amount of money.  Open-end credit gives you a certain limit on the amount of money you can borrow. Cosigner  Responsible for the repayment of a loan if the original party does not pay. T008.01.06 G8

7. Seller-Provided Credit Many stores provide credit to customers. Same as Supplier Credit – used by companies for supplies purchased on a regular basis. T008.01.07 G9

8. Consumer Finance Companies Specialize in loans to people with poor credit ratings. The cost of credit is higher than other institutions. T008.01.08 G10

9. Payroll Advance Services Short-term loans. Pawnshop  Based on the value of something you own. “Borrow Until Payday” Loan  Cost is extremely high. T008.01.09 G11

10. Bonds Bonds – written promise to repay a loan with interest on a specific date. The buyer of the bond is considered the creditor. Corporate Bonds  Usually used to finance buildings and equipment. Municipal Bonds  State and local governments use these to finance projects. Savings Bonds  Sold by federal government. T008.10.10 G12

11. Other Sources of Credit for Businesses Small Business Administration  Offers a number of financial, technical, and management programs to help businesses. T008.01.11 G13

12. Other Sources of Credit for Consumers Life Insurance Plans  Cash Value Insurance Provides both savings and death benefits. Retirement Plans T008.01.12 G14