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NDSU HDFS 357 - Intro to Credit

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LECTURE 8Chapter 6: Introduction to Consumer Credit-What is consumer Credit?Credit is an arrangement to receive cash, goods or services now, and pay for them in the futureConsumer Credit is the use of credit for personal needs by individuals and families-Advantages of CreditCurrent use of goods and servicesPermits purchase even when funds are lowEasier to return merchandiseConvenient when shoppingOne monthly payment for multiple purchasesSafer than cashNeeded for hotel, car reservations and shopping onlineCan take advantage of float time/grace periodMay get rebates, airline miles, or other bonuses-Disadvantages of CreditTemptation to overspendFailure to repay loan has serious consequencesDoes not increase total purchasing powerCredit costs money-Closed/Open CreditClosed-End CreditOne-time loans for a specific purpose that you pay back in a specified period of time, and in payments of equal amountsEx: mortgage, automobile, and installment loans for furniture, appliances and electronicsOpen-End CreditUse as needed until line of credit is reachedLine of credit- the maximum dollar amount that can be charged on a specific credit card amountCredit cards, department store cards, bank credit cards, incidental credit-Credit Cards8 out of 10 U.S. households carry one or more credit cardsOne-third are convenience users- pay balance in full each monthTwo-thirds are borrowers- carrying a balance over, paying finance chargesCo-branding- linking a credit card with a business offering rebates on products and servicesHDFS 357 1st Edition Lecture 8Outline of Current LectureI. What is consumer credit?II. Advantages of CreditIII. Disadvantages of CreditIV. Closed/Open CreditV. Credit CardsCurrent LectureLECTURE 8 Chapter 6: Introduction to Consumer Credit-What is consumer Credit?- Credit is an arrangement to receive cash, goods or services now, and pay for them in the future- Consumer Credit is the use of credit for personal needs by individuals and families -Advantages of Credit- Current use of goods and services- Permits purchase even when funds are low- Easier to return merchandise- Convenient when shopping- One monthly payment for multiple purchases- Safer than cash- Needed for hotel, car reservations and shopping online- Can take advantage of float time/grace period- May get rebates, airline miles, or other bonuses -Disadvantages of Credit- Temptation to overspend- Failure to repay loan has serious consequences- Does not increase total purchasing power- Credit costs money -Closed/Open Credit- Closed-End Credito One-time loans for a specific purpose that you pay back in a specified periodof time, and in payments of equal amounts Ex: mortgage, automobile, and installment loans for furniture, appliances and electronics- Open-End Credito Use as needed until line of credit is reachedo Line of credit- the maximum dollar amount that can be charged on a specificcredit card amount Credit cards, department store cards, bank credit cards, incidental credit  -Credit Cards- 8 out of 10 U.S. households carry one or more credit cards- One-third are convenience users- pay balance in full each month- Two-thirds are borrowers- carrying a balance over, paying finance charges- Co-branding- linking a credit card with a business offering rebates on products and


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