I. What is Credit Credit #1

A. To receive funds for goods with the intent to________ _______ _______

B. _________________is the amount originally borrowed,

C. _____________is amount added on for the privilege of borrowing

II. Installment Debt Credit #2

A. A loan paid back in _______________payments over time

B. Used for purchase of durable goods that last over_________ __________

C. _______________payback periods but higher interest

D. ________________Mortgages are most popular

III. Why People Use Credit

A. To satisfy an _______________need

B. To avoid the_______________

C. To spread payments out over a products_________________

IV. Deciding to Use Credit

A. Consider the ________________of having product now

B. Consider costs of interest and inability to buy other items

C. Consider other benefits like ______ ______________ and frequent flyer miles

Who gives Loans

Commercial Banks-offer savings and checking accounts and give the __________loans

Savings Banks-like commercial banks-interest is __________than banks

Credit Unions-are _____________by its members and offer the cheapest loans available

Finance Companies-takes over installment debt for retailers-offer the _____________interest

Charge Accounts

Regular Charge Accounts

–30 day charge-must be paid at __________of the month

–If not interest is charged

–______________can be charged until balance is paid Revolving Charge Accounts

–may make ___________charges without paying balance

–must just make__________ _________

–interest charges for balance not paid

Charge Accounts 2

Credit Cards

–both regular and revolving

–have credit limit

Finance Charges

Finance charges- _______ _____ ____________expressed in dollars and cents

includes ________________fees calculated by Previous, Adjusted,

Average and Past Due Balance Methods

Annual Percentage Rate

cost of credit expressed in a__________ __________

Computing Finance Charges

page 93 Problem Beginning Balance of $500 Interest rate of 12% apr

–Monthly is 12/12 = 1%–MPR 1%

payment made halfway through the month of $100–Previous Method Beginning Balance

•500 x .01 = $5 Finance Charge

Adjusted Method-Ending Balance

$500 – 100 = $ 400 400 x .01 = $4 Finance

Charge

Average Method

500 x 15 =7500 400 x 15 =6000 =13500/30 = 450 450 x 1% = $4.50

Find the monthly finance charge– for previous, adjusted and average daily balance methods

Finance Charge Problem

Beginning Balance of $200 Interest rate of 18% annual

percentage rate 1.5% monthly Payment made halfway of $100 find the monthly finance charge

Finance Charge Quiz

Beginning Balance of $400 Interest rate of 24% Payment made of halfway of

$100 find the monthly finance charge

Previous 400 x .02 = $8

Adjusted400-100=300300 x .02 = $6

Average 350 x .02 = $7

Finance Charge Quiz APR 12% MPR 1% Beginning Balance

$200$100 payment made halfway through

the monthFor you smart ones-for Average only$50 payment 1/3 through the month$50 payment made 2/3 through the

month