Transcript ch 25-29 credit & budgets (ppt)
CREDIT, BUDGET, AND CHECKING ACCOUNTS
Chapters 25, 26, 28, 29
What is Credit? Chapter 25
• Credit -
an agreement to get money, goods, or services in exchange for a promise to pay
• Creditor – Person who lends money or provides credit.
• Debtor – The one borrowing money or using credit.
• Interest – A fee that creditors charge for using their money.
Who uses Credit? Chapter 25
• Consumer Credit A type of credit used by people for personal reasons.
• Commercial Credit – Credit used by businesses.
• Credit Rating – The measure of a person’s ability and willingness to pay debts on time.
Types of Credit Chapter 25
• Charge Account Common type of short-term and medium-term credit often offered by dealers or stores.
• Revolving Account – Allows you to borrow or charge up to a certain amount of money, such as $3,000, and pay back a part of the total or the entire balance for each month.
• Installment Loans – Loans repaid in regular payments over a period of time.
(student loans, personal loans, and home improvement loans)
• What are the factors that determine a person’s credit rating?
• How can using credit cards be very costly to the consumer?
Applying for Credit Chapter 26
• Credit Bureau An agency that collects information about you and other credit consumers.
• Credit Limit – The maximum amount you can spend or charge on a credit account.
• Cosigner – payments.
Is responsible for a loan if you don’t make the
Using Credit Chapter 26
• Down Payment A portion of the total cost that you pay when you purchase a product.
• Principal – The amount of money you still owe and on which the interest is based.
• Secured Loan – The loan is backed by collateral.
• Unsecured Loan – The loan is not backed by collateral.
• Annual Percentage Rate (APR) – your yearly credit.
Determines the cost of
Using Credit (cont.) Chapter 26
• Finance Charge The total amount it costs you to finance the loan stated in dollars and cents. • Variable Rate – The rate will change when interest rates in the banking system change.
• Cash Advance – Borrowing money on a credit card rather than use it to make a purchase.
• Grace Period – Amount of time you get to pay off a debt.
• Garnishment of Wages – your paycheck.
When a creditor takes all or part of • Repossess – To take back collateral.
• What are the five C’s of credit (explain each)?
• Why is having good credit necessary in today’s economy?
Planning a Budget Chapter 28
• Money Management The process of planning how to get the most from your money.
• Budget – A plan for using your money in a way that best meets your wants and needs.
• Income – The actual amount of money you earn during a given time period.
• Deductions – Amounts that are taken out of your pay before you receive your paycheck.
Lifestyle Costs Chapter 28
• Gross Pay specific time.
The total amount of money you earned for a • Net Pay – Your gross pay minus deductions.
• Withholding – Subtracting taxes from a paycheck to be forwarded to the government.
• Expenditures – Food, rent, clothing, ect.
Lifestyle Costs (cont.) Chapter 28
• Fixed Expenses – regularly paid.
Expenses occurring regularly and are • Variable Expenses – inconsistent.
Expenses that fluctuate or are • Budget Variance – The difference between how much you planned to spend and how much you actually spent.
• List the 5 steps in creating a budget.
Checking Account Basics Chapter 29
• Demand Deposits Another term for checking accounts because each check demands a that bank release money on demand.
• Interest-bearing Account – your account’s balance.
Account that earns interest on • Signature Card – A record of your signature used by the bank to verify your identity.
• Overdrawing – Writing checks for more money than you have in your account.
Account Services Chapter 29
• Overdraft Protection – A line of credit for overdrawn checks.
• Stop Payment – check.
An order for a bank not to cash a particular • Debit Card – Similar to a credit card but money is taken directly from your checking account.
• Check Register – transactions.
A checkbook log where you keep track of all • Endorsement – check.
The signature of the payee on the back of the
Bank Reconciliation Chapter 29
• Bank Statement The bank’s record of all your transactions in your checking account.
• Canceled Checks – cashed.
Checks you’ve written that have been • Bank Reconciliation – The process of seeing whether your records agree with the bank’s records.
• Outstanding Checks – not yet cashed.
Checks that have been written but