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Do Now 10/21 & 10/22. Study Chapters 8, 9, 10, & 20 for Unit 2 Test. Agenda 10/21 & 10/22. Do Now: Study for Unit 2 Test Unit 2 Test Hand Back Step 1 of PFM Project Discuss Resumes Go Over Step 2 of PFM Project Closure: Watch and Discuss Wealth Inequality in America.

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do now 10 21 10 22
Do Now 10/21 & 10/22

Study Chapters 8, 9, 10, & 20 for Unit 2 Test

Chapter 16

agenda 10 21 10 22
Agenda 10/21 & 10/22
  • Do Now: Study for Unit 2 Test
  • Unit 2 Test
  • Hand Back Step 1 of PFM Project
  • Discuss Resumes
  • Go Over Step 2 of PFM Project
  • Closure: Watch and Discuss Wealth Inequality in America

Chapter 16

do now 10 24 10 25
Do Now 10/24 & 10/25

Answer the following in your notebook:

In the early part of our nation’s history, we had no credit. People used coins or paper money to make purchases. Today, we are moving toward a paperless and cashless society. Would it be possible to live without ever using coins, paper money, or even checks? Explain how people might live on credit alone.

Chapter 16

agenda 10 21 10 221
Agenda 10/21 & 10/22
  • Do Now: Paperless and Cashless World Discussion
  • Homework and Project Discussions
  • Chapter 16 – Credit: What and Why
  • Activity: Credit Scenarios
  • Closure: Why is it important to make credit card payments on or before the due date?

Chapter 16

homework 10 24 10 25
Homework 10/24 & 10/25
  • Find a credit card offer online, in your mail, at a bank, or at a retail store. Read the fine print and make a list of all the potential traps you find.
  • Print or write your answers on paper and hand in next class.

Chapter 16

pfm project 10 24 10 25
PFM Project 10/24 & 10/25

Any questions on what to do for Step 2 of the PFM Project?

Chapter 16

credit in america

16

Credit in America

16.1 Credit: What and Why

16.2 Types and Sources of Credit

the need for credit
The Need for Credit
  • Credit is the use of someone else’s money, borrowed now with the agreement to pay it back later.
  • Early forms of credit
  • Credit today

Chapter 16

the use of credit
The Use of Credit
  • A debtor is a person who borrows money from others.
  • This money, called debt, must be repaid.
  • A creditor is a person or business that loans money to others.
  • Creditors charge money for this service in the form of interest and fees.
  • A debtor must be qualified to receive credit.

Chapter 16

qualifying for credit
Qualifying for Credit
  • To qualify for credit, you must have the ability to repay the loan.
  • Qualification is based on three things:
    • Income
    • Financial position
    • Collateral

Chapter 16

income
Income
  • Sources of income include:
    • Job
    • Interest
    • Dividends
    • Alimony
    • Royalties
  • Income represents cash inflow.
  • When your earnings exceed your expenses, you have the capacity to take on debt.

Chapter 16

financial position
Financial Position
  • Capital is the value of property you possess (such as bank accounts, investments, real estate, and other assets) after deducting your debts.
  • Having capital tells the creditor that you have accumulated assets, which indicates responsibility.
  • Your debt represents cash outflow and will be compared to your cash inflow (income).

Chapter 16

collateral
Collateral
  • To borrow large amounts of money, creditors often want more than just your promise to repay; they want collateral.
  • Collateral is property pledged to assure repayment of a loan.
  • If you do not make your loan payments, the creditor can seize the pledged property.

Chapter 16

making payments
Making Payments
  • Once you have completed a credit purchase, you owe money to the creditor.
  • The principal (amount borrowed) plus interest for the time you have the loan is called the balance due.
  • The finance charge is the total dollar amount of all interest and fees you pay for the use of credit.

Chapter 16

advantages and disadvantages of credit
Advantages

Purchasing power

Emergency funds

Convenience

Deferred billing

Proof of purchase

Safety

Disadvantages

Higher costs

Finance charges

Tie up income

Overspending

Advantages andDisadvantages of Credit

Chapter 16

activity 10 24 10 25
Break up in groups of four.

You will be given credit scenarios. Your group must discuss how you would handle the scenario.

Record your response on a sheet of paper. Make sure write all the names of the members of your group.

You will then read aloud your scenario and present your response.

Activity 10/24 & 10/25

Chapter 16

closure 10 21 10 22
Closure 10/21 & 10/22

Why is it important to make credit card payments on or before the due date?

Chapter 16

do now 10 25 10 26
Do Now 10/25 & 10/26

Respond to the following in your notebook:

Credit can be very beneficial or it can lead to financial ruin. Describe the advantages of credit in terms of purchasing power. Describe how credit can become a trap and lead to overspending and other problems.

Chapter 16

agenda 10 25 10 26
Agenda 10/25 & 10/26

Do Now: Pros and Cons of Credit Discussion

Continue Chapter 16 – Types and Sources of Credit

Classwork: Vocabulary

Closure: Accepting Credit Cards Discussion

Chapter 16

homework 10 25 10 26
Homework 10/25 & 10/26

Read and take notes on Chapter 17.

Quiz on Chapters 16 and 17 will be on

  • Friday for A-day class
  • Monday for B-day class

Chapter 16

pfm project 10 25 10 26
PFM Project 10/25 & 10/26

Any questions regarding Step 2 of the PFM project?

Chapter 16

lesson 16 2 types and sources of credit
Lesson 16.2Types and Sources of Credit

GOALS

  • List and describe the types of credit available to consumers.
  • Describe and compare sources of credit.

Chapter 16

types of credit
Types of Credit
  • Open-end credit
  • Closed-end credit
  • Service credit

Chapter 16

open end credit
Open-End Credit
  • Open-end credit is where a borrower can use credit up to a stated limit.
  • Charge cards
  • Revolving accounts

Chapter 16

credit card agreements
Credit Card Agreements
  • A credit card is a form of borrowing and usually involves interest and other charges.
  • The terms of the credit card agreement affect the overall cost of the credit you will be using.

Chapter 16

credit card agreements1

(continued)

Credit Card Agreements
  • Credit card agreement terms to consider:
    • Annual percentage rate (APR)
      • The annual percentage rate (APR) is the cost of credit expressed as a yearly percentage.
    • Grace period
      • The grace period is a timeframe within which you may pay your current balance in full and incur no interest charges.
    • Fees
      • Annual fees, transaction fees, and penalty fees
    • Method of calculating the finance charge

Chapter 16

closed end credit
Closed-End Credit
  • Closed-end credit is a loan for a specific amount that must be repaid in full, including all finance charges, by a stated due date.
  • Also called installment credit
  • Does not allow continuous borrowing or varying payment amounts
  • Often used to pay for very expensive items, such as cars, furniture, or major appliances

Chapter 16

service credit
Service Credit
  • Service credit involves providing a service for which you will pay later.
  • For example, your utility services are provided for a month in advance; then you are billed.
  • Many businesses extend service credit.
  • Terms are set by individual businesses.

Chapter 16

sources of credit
Sources of Credit
  • Retail stores
  • Credit card companies
  • Banks and credit unions
  • Finance companies
  • Pawnbrokers
  • Private lenders
  • Other sources of credit

Chapter 16

retail stores
Retail Stores
  • Examples of retail stores include department stores, discount stores, and specialty stores.
  • Many retail stores offer their own credit cards.
    • These cards are accepted only at the issuing store.
    • Store credit customers often receive discounts, advance notice of sales, and other privilegesnot offered to cash customers or to customers using bank credit cards.
  • Most retail stores also accept credit cards issued by major credit card companies.

Chapter 16

credit card companies
Credit Card Companies
  • Credit card issuers
  • Financial institutions
  • Other organizations

Chapter 16

banks and credit unions
Banks and Credit Unions
  • Credit cards
  • Closed-end loans

Chapter 16

finance companies
Finance Companies
  • A finance company is an organization that makes high-risk consumer loans.
  • There are two types of finance companies:
    • Consumer finance companies
    • Sales finance companies
  • Loan sharks are unlicensed lenders who charge illegally high interest rates.
  • A usury law is a state law that sets a maximum interest rate that may be charged for consumer loans.

Chapter 16

pawnbrokers
Pawnbrokers
  • A pawnbroker (or pawnshop) is a legal business that makes high-interest loans based on the value of personal possessions pledged as collateral.
  • Possessions that are readily salable (such as guns, cameras, jewelry, radios, TVs, and collector’s coins) are usually acceptable collateral.

Chapter 16

private lenders
Private Lenders
  • One of the most common sources of cash loans is the private lender.
  • Private lenders might include parents, other relatives, friends, and so on.
  • Private lenders may or may not charge interest or require collateral.

Chapter 16

other sources of credit
Other Sources of Credit
  • Life insurance policies
  • Borrowing against a deposit
  • Borrowing against an asset

Chapter 16

classwork 10 25 10 26
Classwork 10/25 & 10/26

Activity: Student Activity Guide, p. 155

Complete vocabulary worksheet

Chapter 16

closure 10 25 10 26
Closure 10/25 & 10/26

If you were going into business for yourself, you would have to decide whether or not to accept credit cards from customers. Explain the points in favor of both positions.

Chapter 16

homework 10 24 10 251
Homework 10/24 & 10/25
  • Find a credit card offer online, in your mail, at a bank, or at a retail store. Read the fine print and make a list of all the potential traps you find.
  • Print or write your answers on paper and hand in next class.

Chapter 16