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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. 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

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  1. Do Now 10/21 & 10/22 Study Chapters 8, 9, 10, & 20 for Unit 2 Test Chapter 16

  2. 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

  3. 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

  4. 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

  5. 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

  6. PFM Project 10/24 & 10/25 Any questions on what to do for Step 2 of the PFM Project? Chapter 16

  7. 16 Credit in America 16.1 Credit: What and Why 16.2 Types and Sources of Credit

  8. 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

  9. 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

  10. 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

  11. 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

  12. 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

  13. 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

  14. 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

  15. 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

  16. 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

  17. Closure 10/21 & 10/22 Why is it important to make credit card payments on or before the due date? Chapter 16

  18. 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

  19. 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

  20. 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

  21. PFM Project 10/25 & 10/26 Any questions regarding Step 2 of the PFM project? Chapter 16

  22. 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

  23. Types of Credit • Open-end credit • Closed-end credit • Service credit Chapter 16

  24. Open-End Credit • Open-end credit is where a borrower can use credit up to a stated limit. • Charge cards • Revolving accounts Chapter 16

  25. 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

  26. (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

  27. 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

  28. 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

  29. Sources of Credit • Retail stores • Credit card companies • Banks and credit unions • Finance companies • Pawnbrokers • Private lenders • Other sources of credit Chapter 16

  30. 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

  31. Credit Card Companies • Credit card issuers • Financial institutions • Other organizations Chapter 16

  32. Banks and Credit Unions • Credit cards • Closed-end loans Chapter 16

  33. 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

  34. 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

  35. 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

  36. Other Sources of Credit • Life insurance policies • Borrowing against a deposit • Borrowing against an asset Chapter 16

  37. Classwork 10/25 & 10/26 Activity: Student Activity Guide, p. 155 Complete vocabulary worksheet Chapter 16

  38. 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

  39. 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

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