CREDIT IN AMERICA

Credit –

Over ______ of all purchases in the U.S. are made on credit.

What do you buy with credit?

Credit became necessary during the ________ ___________

Earliest form of credit was the account at the _______ _____.

In the 1800s bank interest rates were ________% and loans generally were made only in emergencies.

Since 1900 interest rates have dropped.

B/c credit increased people’s ability to buy ______ and _______, the American economy grew at a rapid pace.

1920-1990 credit became the American way of life.

1970s brought _______ ______ ______ and credit counseling.

In the 1990s record numbers of people declared _________.

Credit can be ________ and cause serious financial trouble.

Credit is easy to get

Buying over the _______ has increased the use of credit.

Many _______ have there own credit cards.

Avg. American has more than ______ in credit card debt

Debtor –

Creditor –

Qualifying for credit is based on 3 things:

1. Income –

2. Financial position: Capital –

3. Collateral –

Principal –

Balance due –

Finance charge –

Minimum payment -

Due date –

Late fee –

Installment agreement –

Secured loan –

Credit can expand your purchasing potential and raise your ___________________.

You can establish a good credit ________.

Credit can help in emergency situations.

Line of Credit –

Credit is convenient.

Deferred billing –

Credit provides _______ ___ ________.

Carrying a credit card is safer than large sums of cash.

Credit purchases may cost more.

Adds _________ _________.

You tie up future income.

Buying on credit can lead to ____________.

Open-ended credit –

Closed-end credit –

Service credit –

Credit cards Has a stated limit Can be used again and again 30 Day Accounts-

Revolving Credit Accounts –

Billed at the end of each month.

Annual Percentage Rate –

Grace Period –

Annual Fees –

Penalty fees-

Late fees –

Methods of Calculating Finance Charges - depends on lender

Pay for expensive items like _____, ___________, _________.

Fixed payments over a set period of time

Not allowed to continue borrowing after date.

___________ loan

Product is usually _________.

_______ services

Services are provided in advance and then paid for.

Bills must be paid _________.

May charge fees for late payments.

Retail stores

◦

◦

Credit Card Companies

◦ Ex: Visa, Mastercard, American Express, Discover

◦ ________________accepted nationwide

◦ Line of credit up to a limit

◦ May use a cash advance -

Banks and Credit Unions◦ Interest rates vary

◦ Loans or credit cards

◦ Credit unions are more willing to make loans b/c the members have stake in the success of the credit union; usually have lower loan rates than commercial banks

Finance Companies-

◦ Consumer finance companies – consumer durables (ex: cars, refrigerators)

◦ Sales finance company – makes loans through authorized representatives (ex: GMAC)

Finance companies usually charge max rate allowed by law

Loan Sharks –

Usury Laws –

Pawnbrokers –

◦ Possession must be readily salable◦ Makes loans based on appraisal value ◦ Can redeem item by paying back the loan plus

interest in a set time◦ If not paid back, the broker can sell the items in

the pawn shop

Private Lenders –

Other Sources:◦ Life Insurance – can borrow from cash value;

reduces value of life policy.◦ CDs – can be used as collateral