Orientation to Business/Personal Finance-Week 1 1...

Chapter 25-27 OTB/Personal Finance-1

Orientation to Business/Personal Finance-Week 1

Ch. 25, 26, & 27 assignments:

1. Complete chapter 25 notes

a. PowerPoint on GC or Teacher’s Page

b. notes packet was given in class


a. on GC or Teacher’s Page

b. notes packet was given in class


a. PowerPoint on GC or Teacher’s Pages

b. Create your own notes (outline will be provided)

4. Reading Credit Card Statement & questions

a. Statement will be available online or as a handout.

b. Answer online questions in GC or on handout

5. Calculate Credit Card Interest

6. Complete chapter 25-27 Bell work

a. On GC like normal

OR

b. Check out the chapter Study Guide & write down answers


Name: ________________________________________ period ________

Orientation to Business

Chapter 25 Notes

Credit: The Promise to Pay

What is credit?

• Creditor-

o Example:

• Debtor-

o Example

Credit is a matter of __________.

Interest-

Based on 3 factors:

Who uses credit?

o Consumer Credit-

o Commercial credit-


Advantages of Credit

What is credit rating?

What does credit do to our economy? (p408)

Disadvantages of Credit

o

o Example:

o

o

Types of Credit

o Credit is usually broken down into 3 different types

•


•

•

_______________________--short and medium term—offered by stores to allow consumers

to buy now but pay later.

Example:

3 types of charge accounts.

a. Regular charge accounts—

b. Revolving charge accounts—

c. Budget charge accounts—

Credit Cards—

Some may have annual fees, usually charge interest

3 types of credit cards


A. Single-purpose cards—

B. Multipurpose cards—

C. Travel and entertainment cards—

Banks and other financial institutions—offer loans

1. Single payment loan—

2. Installment loan—

3. Mortgage loan—

Seller-Provided Credit—

Example:

Consumer Finance Companies—


Example:

Payroll advance services—

o Pawnshop loan—

o “Borrow until payday” loan—

Orientation to Business

Chapter 26 Notes

Getting Credit

Average college student has ________ credit cards and is ___________ in debt.

Things you need to know if you are going to get a credit card:

Applying for Credit

o What do you need to do?

o What are some questions about you?


Credit Worthiness—The 5 C’s

1. Capacity—

2. Character—

3. Credit History—

a. Credit bureau

4. Capital—

5. Collateral—

Credit Limit—

Example:


Cosigner-

Example:

Using Credit

➢ Besides credit cards, you can take out loans for large purchases. Loans usually have

lower interest rates than credit cards.

➢ Installment Loans

o Down payment-

▪ Example:

➢

o Principal-

▪ Example:

__________________--loans obtained from banks, credit unions, savings and loans, and finance

companies that can be used to purchase items anywhere and is paid back like an installment loan.

➢ Secured loan

o Example:

➢ Unsecured loan

o Example:


Paying for Credit

Annual Percentage Rate (APR)-

Example:

Finance charge-

Example:

Variable interest rate—

Fees-

Cash Advance –

Grace Period-

Keeping Credit

Your Credit Burden


Example:

Making the minimum payment—all cards have a min. payment—should always try to pay more

Overextending your credit—

Credit problems

Garnishment of wages-

Repossess-


Name_______________________________________

Chapter 27 Notes Outline

Directions: Using this outline, set up your own notes in your notebook/blank sheet of paper. The

outline follows the part of the chapter. You will be using your own created notes for the

upcoming chapter 25, 26, & 27 test.

• Protecting Your Rights

o Usury law

▪ Define

o Consumer Credit Protection Act

▪ Truth-in-lending disclosure

▪ Advertising credit

▪ Protecting Card Owners

o Equal Credit Opportunity Act

▪ 3 reasons for denying credit

o Fair Credit Reporting Act

▪ Right to know

▪ Right to be notified

▪ Right to privacy

o Fair Credit Billing

▪ Notify the creditor

▪ Stop payment

o Fair Debt Collection Practices Act

▪ Collection Agent

o Enforcing the Laws

▪ What is FTC?

• Handling Your Credit Problems

o Credit Counseling

o Consolidating Debts

o Bankruptcy

o Credit Services

Reading a Credit Card Statement


A credit card statement includes information such as the credit card transactions you made in a month, credit card payments, finance charges, payments due, and your available credit. Understanding how to read your credit card statement is important so you can make sure you understand where you are spending your money, and also to make sure the transactions appearing on the statement are correct. Jason received the following credit card statement. Answer the questions that follow.

Our Example Bank

CREDIT CARD STATEMENT

Name Jason

Account Number 3893 4253 7947 1969

Statement Date JAN 28

Payment Due Date FEB 10

Credit Line $6,000.00

Available Credit $5,042.11

New Balance $957.89

Minimum Payment Due $50.00

Previous Balance $1,000.00

Purchases $957.89

Payments $1,000.00

Finance Charge $15.00

TRANSACTION

NUMBER DATE DESCRIPTION AMOUNT

JAN 1 Payment 1,000.00

198 JAN 4 Nicholas's Candies 66.00

199 JAN 8 Blake's Phone Company 193.00

200 JAN 11 Emma's Electronics Repair 132.75

201 JAN 12 Connor's Candies 63.00

202 JAN 13 Ethan's Department Store 186.00

203 JAN 14 Hailey's Department Store 8.00

204 JAN 17 University Textbook Store 192.00

210 JAN 21 McDonald’s 21.89

215 JAN 23 Cinemark Movies 12.75

216 JAN 23 SuperCuts 15.00

218 JAN 24 NTB tires-oil change/tire rotation 67.50

Reading a Credit Card Statement—Version B

A credit card statement includes information such as the credit card transactions you made in a

month, credit card payments, finance charges, payments due, and your available

credit. Understanding how to read your credit card statement is important so you can make sure

you understand where you are spending your money, and to make sure the transactions appearing

on the statement are correct.


Jason received the following credit card statement. Answer the questions that follow.

Our Example Bank

CREDIT CARD STATEMENT

Name

Jason

Account Number

3893 4253 7947 1969

Statement Date

JAN 28

Payment Due Date

FEB 10

Credit Line

$6,000.00

Available Credit

$5,042.11

New Balance

$957.89

Minimum Payment

Due

$50.00

Previous Balance

$1,000.00

Purchases

$957.89

Payments

$1,000.00

Finance Charge

$15.00

TRANSACTION

NUMBER DATE DESCRIPTION AMOUNT

JAN 1 Payment 1,000.00

198 JAN 4 Nicholas's Candies 66.00

199 JAN 8 Blake's Phone Company 193.00

200 JAN 11 Emma's Electronics Repair 132.75

201 JAN 12 Connor's Candies 63.00

202 JAN 13 Ethan's Department Store 186.00

203 JAN 14 Hailey's Department Store 8.00

204 JAN 17 University Textbook Store 192.00

210 JAN 21 McDonald’s 21.89

215 JAN 23 Cinemark Movies 12.75

216 JAN 23 SuperCuts 15.00

218 JAN 24 NTB tires-oil change/tire rotation 67.50


Reading a Credit Card Statement—Version B QUESTIONS

1.

What is the new balance listed on the statement? _______________

2.

How much is the finance charge on Jason’s credit card? _______________

3.

What is the individual's account number? _______________

4.

What date is the credit card payment due? _______________

5.

What is Jason's available credit? _______________

6.

What was the previous balance on Jason's credit card? _______________

7.

What is Jason's credit line? _______________

8.

What is the minimum payment that must be paid? _______________

9.

What is the date of the credit card statement? _______________

10.

How much did Jason make in payments to the credit card company?

11. What is the most expensive item on the credit card?

12. What was the date, item and cost of Jason’s least expensive purchase?

13. Based on the credit card statement, which are purchases are necessary needs (Ch. 1)

and which are “extras”? Explain.


Introduction to Credit Cards

Credit cards are plastic cards issued by a bank or other business allowing the holder of the card to purchase goods and services without using cash, also called buying on credit. They allow you to purchase things that you may not currently have the money to buy. When you use a credit card, the credit company that issued the credit card pays the store. Later, you will get a bill in the mail from your credit card company for the amount you purchased. At that time, you can either pay the bill in full, or only pay a minimum amount, and wait till later to finish paying. If you wait till later, you will owe the credit card company interest on the amount that you do not pay.

Ethan's credit card company charges 20.4% a year interest, or 1.7% per month, for any unpaid amount. For the month, Ethan purchased $400.00 worth of goods and services. If each month Ethan does not pay the credit card bill in full, but instead just pays the monthly minimum charge of $40.00, finish filling in the following table to see how much money Ethan will end up paying. Round each calculation to the nearest penny.

Date Previous Balance

Interest Charge

Balance plus Interest

Your Payment

Remaining Balance

JAN 1 $400.00 $6.80 $406.80 $40.00 $366.80

FEB 1

MAR 1 $333.04 $5.66 $338.70 $40.00 $298.70

APR 1 $298.70 $5.08 $303.78 $40.00 $268.78

MAY 1 $268.78 $4.48 $268.26 $40.00 $228.26

JUN 1 $228.26 $3.88 $232.14 $40.00 $192.14

JUL 1 $192.14 $3.27 $195.41 $40.00 $155.41

AUG 1 $155.41 $2.64 $158.05 $40.00 $118.05

SEP 1 $118.05 $2.01 $120.06 $40.00 $80.06

OCT 1 $80.06 $1.36 $81.42 $40.00 $41.42

NOV 1 $41.42 $0.70 $42.12 $40.00 $2.12

DEC 1 $2.12 $0.14 $2.16 $2.16 $0

What was the total interest paid? $_________________

How much did the item now cost by using the credit card? $_________________

http://images.google.com/imgres?imgurl=http://project100blog.files.wordpress.com/2008/01/credit_card_alternative.jpg&imgrefurl=http://branes.tumblr.com/&h=1200&w=1600&sz=948&hl=en&start=12&um=1&usg=__6ljbqrbvSgCTGlDqxixQg3sXLCg=&tbnid=n4MWfPUCu4bGeM:&tbnh=113&tbnw=150&prev=/images%3Fq%3Dcredit%2Bcard%26um%3D1%26hl%3Den%26sa%3DN


Introduction to Credit Cards

Credit cards are plastic cards issued by a bank or other business allowing the holder of the card to purchase goods and services without using cash, also called buying on credit. They allow you to purchase things that you may not currently have the money to buy. When you use a credit card, the credit company that issued the credit card pays the store. Later, you will get a bill in the mail from your credit card company for the amount you purchased. At that time, you can either pay the bill in full, or only pay a minimum amount, and wait till later to finish paying. If you wait till later, you will owe the credit card company interest on the amount that you do not pay.

Ethan's credit card company charges 30% a year interest, or 2.5% per month, for any unpaid amount. For the month, Ethan purchased $400.00 worth of goods and services. If each month Ethan does not pay the credit card bill in full, but instead just pays the monthly minimum charge of $40.00, finish filling in the following table to see how much money Ethan will end up paying. Round each calculation to the nearest penny.

Date Previous Balance

Interest Charge

Balance plus Interest

Your Payment

Remaining Balance

JAN 1 $400.00 $10.00 $410.00 $40.00 $370.00

FEB 1

MAR 1 $333.04 $5.66 $338.70 $40.00 $298.70

APR 1 $298.70 $5.08 $303.78 $40.00 $268.78

MAY 1 $268.78 $4.48 $268.26 $40.00 $228.26

JUN 1 $228.26 $3.88 $232.14 $40.00 $192.14

JUL 1 $192.14 $3.27 $195.41 $40.00 $155.41

AUG 1 $155.41 $2.64 $158.05 $40.00 $118.05

SEP 1 $118.05 $2.01 $120.06 $40.00 $80.06

OCT 1 $80.06 $1.36 $81.42 $40.00 $41.42

NOV 1 $41.42 $0.70 $42.12 $40.00 $2.12

DEC 1 $2.12 $0.14 $2.16 $2.16 $0

What was the total interest paid? $______42.16

How much did the item now cost by using the credit card? $ _______

http://images.google.com/imgres?imgurl=http://project100blog.files.wordpress.com/2008/01/credit_card_alternative.jpg&imgrefurl=http://branes.tumblr.com/&h=1200&w=1600&sz=948&hl=en&start=12&um=1&usg=__6ljbqrbvSgCTGlDqxixQg3sXLCg=&tbnid=n4MWfPUCu4bGeM:&tbnh=113&tbnw=150&prev=/images%3Fq%3Dcredit%2Bcard%26um%3D1%26hl%3Den%26sa%3DN


Chapter 25 & 26 Study Guide

Your test for Chapter 25 & 26 will be Thursday, November 6th. It will consist of 25 multiple choice and

25 true/false. Be sure to read the book as some questions may come from the book that was not

discussed in class. Your answers to bell works are also due Thursday with all assigned bell-works (8 in

total). The bell work will be worth 60 points. The test will be worth 100 points.

For this test you should be able to:

Chapter 25

• Understand the meaning of credit

• Identify the creditor and debtor

• Know the 3 factors that influence interest

o Interest rate

o Loan length

o Loan amount

• Know the difference between consumer credit and commercial credit

• Identify the advantages of credit

o Convenience

o Purchasing products right away

o Emergency

o Internet/home shopping

o Helps stimulate economy

• Identify the disadvantages of credit

o Easy to misuse (buy things you don’t need)

o Paying interest

o Can damage credit rating (not making payments on time)

• Know and identify the different types of credit

o Charge accounts

▪ Regular charge accounts

▪ Revolving charge accounts

▪ Budget charge accounts

o Credit cards

▪ Single-purpose credit cards

▪ Multipurpose credit cards

▪ Travel and entertainment credit cards

o Banks & Other Financial Institutions

▪ Single payment loan

▪ Installment loan

▪ Mortgage loan

o Seller-Provided Credit

o Consumer Finance Companies

o Payroll advance services

▪ Pawnshop loan

▪ Payday loan

• Know how many credit cards the average college student has, and their credit card debt

o 3 credit cards

o About $1500 - $2000 in debt

o Half of all people with credit problems are between 18 and 32

Chapter 26

• Identify the types of questions asked on credit card applications

• Identify and know “The 5 C’s” and the characteristics of each

o Capacity

o Character


o Credit History

▪ Credit bureaus

• Experian

• Equifax

• TransUnion

o Capital

o Collateral

• Know what a credit limit is and why it’s important

• Who is a cosigner? Why would you need one?

• Understand installment loans and its characteristics

o Down payment

o Principle

• Understand the difference between a secured loan and unsecured loan.

• Understand the meaning of annual percentage rate (APR)

• Understand the meaning of finance charges

• Distinguish between variable interest rates and fixed interest rates

• Understand the meaning of grace period

• Identify what can happen if you do not pay your credit card bills

o Bad credit rating

o Garnishing wages

o Repossess

Know and identify the following words:

Credit Charge account

Creditor Revolving account

Debtor Consumer credit

Installment loans Interest

Commercial credit Credit rating

Credit bureau Credit limit

Cosigner Down payment

Finance charge Principal

Annual percentage rate (APR) Secured loan

Grace period Unsecured loan

Repossess Garnishment of wages

Variable rate Cash advance

Assigned Bell-Work Chapter 25 & 26

1. What is credit?

2. What will you do to prevent going into credit card debt?

3. Where can you get credit?

4. Will you get a credit card? Why/why not?

5. What should colleges do to prevent its students from going into credit card debt?

6. Why should you get a credit report?

7. When should use credit and when will you NOT use credit?

8. What should you do if you suspect there is an error on your credit card statement?

9. Why is bankruptcy a last resort for a consumer with debt problems?

10. What is the purpose for a cosigner?

Orientation to Business/Personal Finance-Week 1 1...

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