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					  CREDIT!
What is the price of
   Debt?????
      Key Words for the Lesson:
•   Credit
•   Creditor
•   Debtor
•   Interest
•   Consumer credit
•   Commercial Credit
•   Credit Rating
•   Charge Account
•   Revolving Account
•   Installment Loans
    What is Credit???
• Credit: an agreement to get money, goods, or
  services now in exchange for a promise to pay in
  the future.
• Creditor: one who lends money or provides
  credit
• Debtor: one who borrows money or uses credit
• (Credit is based on the creditor’s confidence that
  the debtor can and will make payments-Credit is
  a matter of Trust)
              INTEREST
• Interest: fee that creditors charge for using their
  money.
• The amount of interest is based on 3 Factors!
1)Interest Rate: percentage of the total amount
  borrowed
2)Length of the Loan: longer the loan the more
  you pay
3)Amount of the Loan: more the amount the more
  interest you pay.
Interest rates vary among lenders. It is very
  important that you shop around for the best rate!
          Who uses Credit?
• Many, Many people! And probably you!
• Credit has replaced money as many means of
  purchasing.
• Consumer Credit: the type of credit used by
  people for personal reasons
• Businesses use credit just as people do! They
  may need to borrow money to pay salaries, pay
  for materials, or other goods.
• Credit used by businesses is: Commercial
  Credit
      Advantages of Credit
• Main advantage is: Convenience!
• Buying on credit allows you to establish a
  Credit Rating: a measure of a person’s
  ability and willingness to pay debts on
  time. (a good rating tells lenders that you
  are responsible)
• Credit contributes to the growth of the
  economy! You will tend to buy more when
  using credit-thus creating more jobs, etc.
      Disadvantages of Credit
• Although it is convenient it is very easy to misuse. You
  may be tempted to by more that you can not afford, buy
  too much, or buy things that you don’t need.
• Items cost more when using credit and not cash because
  of interest rates! The more items you buy the longer it
  will take to pay off your credit card bills.
• If you fall behind on paying your credit bills- your credit
  rating will drop, therefore creating a domino effect! Your
  credit rating will drop!
• Always remember-when using credit, it’s not money
  you own, it’s money you owe!
           ASSIGNMENT:
• What is the difference between creditor
  and debtor?
• What is commercial credit?
• Name the advantages and disadvantages
  of using credit?
• Define: Credit, Creditor, Debtor, Interest,
  Consumer Credit, Commercial Credit,
  Credit Rating
         Types of Credit
• Loans (Long – term, short-term, Medium –
  term)
• **The risk a creditor takes in lending
  money or selling on credit is the most
  important factor in determining the cost of
  credit
• Businesses and Banks lose up to $1.5
  Billion a year in credit fraud!!!
   Short-Term and Medium-term
              Loans
• Short-term loan- one year of less
• Medium – term- one to five years
• Most common type of short term and
  medium term loan is: Charge Accounts.
• A charge account is generally used by
  dealers or stores. They allow the
  customer to buy now and pay later! There
  are 3 types of charge accounts: Regular,
  Revolving, and Budget.
   Regular Charge Accounts
• These require that you pay for your
  purchases in full within a certain period
  (usually 25-30 days).
• If the bill is paid on time, you do not have
  any interest, however if it is not, interest is
  accrued.
 Revolving Charge Accounts
• A revolving charge account allows you to
  borrow or charge up to a certain amount of
  money and pay back a part of the total or
  the entire balance for each month.
   Budget Charge Accounts
• These accounts let you pay for costly
  items in equal payments spread out over a
  period of time.
• Many are Medium – term loans for up to 5
  years.
• Each payment includes part of the total
  due on the item plus interest.
• Examples are: large home appliances,
  cars, and furniture
          CREDIT CARDS
• Like charge accounts except they can be
  used in many different places.
• Credit card companies earn money from
  the interest they charge
• There are 3 types of credit cards: single-
  purpose, multipurpose, and travel and
  entertainment.
      Single purpose cards
• These can only be used to purchase
  goods or services at the business that
  issued the card.
• The operate like revolving charge
  accounts.
• Each month you receive a statement, you
  can pay all or part of the amount owed.
• Example: Lowe’s, BP, Parisians
        Multipurpose Cards
• These cards are also called bank credit cards
  because banks issue them
• They also work like a revolving charge account.
• These cards may be used at many different
  stores, restaurants, and other businesses all
  over the world
• Examples: VISA, MASTERCARD, &
  American Express
• These cards usually have an annual fee unlike
  the multipurpose cards!
 Assignment!
    How will credit card
  companies, businesses
and banks know that they
       can trust you?
   Answer the following 2
slides on a separate sheet
         of paper!
1. How do you know when you can trust someone?
2. Some adults say that your generation cannot be
trusted, that you've lost the values from past generations.
Do you agree, or disagree?

3. Is it a good idea to risk losing your parents' trust for
temporary pleasure

4. How important is trust in your relationships with
friends and family? How would these relationships be
affected if you found out someone was lying to you?

5. Once trust has been broken, what can you do to get
it back? Have you ever lost someone's trust? Has
someone lost your trust? Explain.
6. If your friends were here right now, would they say you were
trustworthy? What would your parents say? Are you more
trustworthy with your friends or with your parents? Do you think
your parents should trust you automatically? Why or why not?

7. If you want someone to trust you, who has most of the
responsibility— you or the other person? Why?

8. As a general policy, should we start off trusting people and
only stop trusting if they prove that they're not worthy? Or should
we be cautious and not trust them until they prove themselves
worthy? What are the advantages and disadvantages of each
position?

9. What does being trustworthy have to do with the quality of
your character?

10.   What are the benefits of being a trustworthy person? How

				
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