Credit Basics PP

Personal Personal FinanceFinance

Chapter 13Chapter 13

CreditAdvantages

• Improved standard of living

© EMC Publishing, LLC

CreditAdvantages


• Convenience and safety


CreditAdvantages



• Help in emergencies


CreditAdvantages




• Help in record keeping


CreditAdvantages




• Help in record keeping

• Forced savings (for some)


CreditDisadvantages

• Interest charges and fees–Grace period

–Universal default• Late payments

• Over limit

• Too much debt / available credit

• Too many credit inquiries / new car loan


CreditDisadvantages

• Interest charges and fees

• Increased impulse buying


CreditDisadvantages

• Interest charges and fees

• Increased impulse buying

• Financial problems–Bankruptcy


Which of the following is not an advantage of credit?

A. Improved standard of living

B. Help in emergencies if purchase is necessary

C. Interest charges and fees associated with credit

D. Help with record keeping

E. Convenience© EMC Publishing, LLC

Which of the following is not an advantage of credit?

A. Improved standard of living

B. Help in emergencies if purchase is necessary

C. Interest charges and fees associated with credit

D. Help with record keeping

E. Convenience© EMC Publishing, LLC

What do you think?Discussion

© EMC Publishing, LLC© EMC Publishing, LLC

• Many people say that credit is the American way. How has credit helped Americans live better lives?

• Do you know anyone who doesn’t use credit at all? How does he or she get by?

• Do you think credit is good or bad?

CreditFraud and Identity Theft

• Credit fraud


CreditFraud and Identity Theft

• Credit card fraud

• Identity theft


John A. DoeTimothy B. Jones

Credit Identity Theft Tips

• Don’t give out your Social Security number unless absolutely necessary (give last four digits only).



• Don’t give out personal information to strangers on phone or over Internet.



• Remove mail from mailbox as quickly as possible (hold mail if going to be gone).



• Carefully examine all bills that come in mail / e-mail.



• Use shredder to destroy personal information.



• Don’t allow others to look over your shoulder or watch you usecredit / debit /ATM cards(skimming).



• Always keep wallet safely in pocket (buttoned) or purse (securely closed).



• Keep all receipts and check against credit card / bank statement for transactions you didn’t make.



• Use secure Web sites if you must send credit or personal information over Internet (https or shttp).


Credit Reporting Identity Theft

• Notify authorities.

• Notify creditors.

• Don’t pay bills you suspect are fraudulent.


Which of the following is not a suggestion to help with identity theft?

A. Cut up outdated credit cards.

B. Shred documents that contain personal information.

C. Don’t give out Social Security number unless absolutely necessary.

D. Destroy all receipts as soon as possible.

E. Securely store wallet.© EMC Publishing, LLC

Which of the following is not a suggestion to help with identity theft?

A. Cut up outdated credit cards.

B. Shred documents that contain personal information.

C. Don’t give out Social Security number unless absolutely necessary.

D. Destroy all receipts as soon as possible.

E. Securely store wallet.© EMC Publishing, LLC



• Do you know anyone who has had his or her identity stolen? How did he or she deal with it?

• What tips do you think are most important to protecting your identity?

• What tips would you add to the list?

Types of Credit Short-Term Credit

• Service credit

• Installment credit

• Credit cards


Types of Credit Short-Term Credit

• Credit vs. charge card–Minimum payment vs. full payment

–Annual percentage rate(APR)


Credit CardsSafeguarding Cards

• Cut up expired cards.

• Sign backs of cards.

• Carry only one or two cards.

• Photocopy both sides for records.

• Retrieve cards after transactions.

• Don’t let others borrow cards.© EMC Publishing, LLC

Other CardsNot Credit Cards

• Debit cards

• Prepaid cards

• Gift cards


LoansTypes of Loans

• Personal loans–Secured (collateral)

–Unsecured loans


LoansTypes of Loans

• Auto loans


LoansTypes of Loans

• Student loans


LoansTypes of Loans

• Home loans (mortgage)– Fixed vs. variable rate

• Home equity loans– Usually variable rate tied to prime


LoansTypes of Loans

• Consolidation loans


LoansSources of Loans

• Banks

• Credit unions

• Savings and loans (mutual savings banks)

• Consumer finance companies


LoansSources to AVOID!

• Credit card cash advances

• Refund anticipation loans

• Payday loans

• Pawnshops

• Loan sharks– Rate limit varies by state


Do you want cash back?

YES NO

Which of the following would be the most expensive source for a loan?

A. Payday loan

B. Reputable bank

C. Credit union

D. Savings and loan

E. Consumer finance company


Which of the following would be the most expensive source for a loan?

A. Payday loan

B. Reputable bank

C. Credit union

D. Savings and loan

E. Consumer finance company




• Why would someone take a payday or other high-interest loan? What alternatives should she or he consider?

• What do you think about taking a loan for your tax refund before you receive it? Is that a good way to purchase something now that you really want?

Business

Credit Basics PP