Lessons In Economics Economic Efficiency

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Duval County Public SchoolsJacksonville, Florida
Economics Destination JAXPORT
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Credit and Consumerism
Written by Mary Chowenhill, Robert E. Lee High
School Patrick Curran, Terry Parker High
School Jacksonville, Florida October, 2009
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Preview Questions

• What does budgeting have to do with my spending?
• What type of insurance do I need?
• Why is my credit score important?
• What are the risks and rewards of credit cards?
• Do I really have to know anything about financing
  to buy a car?

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Objectives

• To examine the budgeting process.
• To explore comparison shopping.
• To understand a credit score and what it affects.
• To examine credit cards and their terms.

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Goal

• To be able to explain personal finance as it
  affects individuals and the consumer decisions
  they make.

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Concepts

• Consumer Credit
• Disclosures
• Interest
• Credit Score
• Interest Rate
• Insurance

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Credit and Consumerism

• What are your personal economic goals?

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Credit and Consumerism

• What are your personal economic goals?
• Make money?

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Credit and Consumerism

• What are your personal economic goals?
• Make money?
• Retire before age 65?

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Credit and Consumerism

• What are your personal economic goals?
• Make money?
• Retire before age 65?
• Own a house?

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Credit and Consumerism

• What are your personal economic goals?
• Make money?
• Retire before age 65?
• Own a house?
• Get a credit card?

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Credit and Consumerism

• What are your personal economic goals?
• Make money?
• Retire before age 65?
• Own a house?
• Get a credit card?
• Travel?

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Credit and Consumerism

• What are your personal economic goals?
• Make money?
• Retire before age 65?
• Own a house?
• Get a credit card?
• Travel?
• Have so much debt that you cant do any of this?

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Credit and Consumerism

• Failure to plan is planning to fail!

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What is a credit score?

• Using a statistical program, creditors compare
  information on you to the past performance of
  consumers with similar profiles.

• A scoring system awards points for each factor
  that helps predict who is most likely to repay a
  debt. A total number of points -- a credit score
  -- helps predict how creditworthy you are, that
  is, how likely it is that you will repay a loan
  and make the payments when due.

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Credit Scores

• What factors go into a credit score?
• Housing information
• Do you rent?
• Do you own the house?
• Do you have a mortgage?
• Do you live with Mom and Dad?

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Credit Scores

• What factors go into a credit score?
• Employment Information
• Do you have a job?
• How long have you had it?
• Did you just change careers?
• How much do you get paid?

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Credit Scores

• What factors go into a credit score?
• Payment Information
• What types of bills do you have and how
  much do you owe?

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How do credit scores work?

• A number between 300 and 850 that measures an
  individual's creditworthiness based on credit
  history. Scores are calculated using mathematical
  methods that incorporate credit history, amount
  of credit used and available, number of late and
  on-time payments, whether any payments due are in
  default, and other variables. Also called a
  credit rating, which can be broadly categorized
  simply as poor, fair, good or excellent.

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How does my credit score rate?

• 800 and up
• Excellent
• 700 to 799
• Good
• 550 to 699
• Fair
• 549 and below
• Poor

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What are credit cards?

• Any card that may be used repeatedly to borrow
  money or buy goods and services with credit.
• They are issued by banks, credit unions, savings
  and loans institutions, retail stores and other
  businesses.

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What are disclosures?

• The Federal Truth-in-Lending Act require that the
  finance charge be disclosed to you in terms of a
  dollar amount and as an annual percentage rate
  (APR). The APR is the cost of credit expressed as
  a yearly rate of interest.

• Creditors are required to disclose the cost of
  credit so that you can compare costs from several
  different creditors. Different creditors will
  charge different amounts and rates even for the
  same types of credit.

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Where can I find the disclosures?

• On the card application.

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Interest Rate or A.P.R.
Balance Transfer Cash Advance
Delinquency Rate
Other Rates
Grace Period
Annual Fee
Other Fees
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Buying A Car

• For most people, a car purchase is the second
  most expensive item they will buy.
• The most expensive item people buy is a house.

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How do you figure interest?

• What is the amount of your loan? This is called
  the principal (P).

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How do you figure interest?

• What is the amount of your loan? This is called
  the principal (P).
• What is your interest rate? (R)

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How do you figure interest?

• What is the amount of your loan? This is called
  the principal (P).
• What is your interest rate? (R)
• How long is your loan for? This is called time.
  (T)

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How do you figure interest?

• P x R x T Total Interest (TI)

• P 100 100
• x R 10 x .10
• x T 2 years 2
• 20 20

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How do you figure

• Loan Amount
• Principal 100
• Total Interest 20
• New Principal 120
• Payment
• New Principal 120 5 a month
• Number of Payments 24

• Number of Payments
• Time 2
• Months/Year 12
• Payments 24

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Insurance

• What types of insurance are there?

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Insurance

• What types of insurance are there?
• Homeowners, on your house.

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Insurance

• What types of insurance are there?
• Homeowners, on your house.
• Auto, on your car.

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Insurance

• What types of insurance are there?
• Homeowners, on your house.
• Auto, on your car.
• Renters, if you rent a place to live.

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Insurance

• What types of insurance are there?
• Homeowners, on your house.
• Auto, on your car.
• Renters, if you rent a place to live.
• Life, health, dental, liability, flood,
  wind-damage, and GAP are also types of insurance
  you may encounter during your life

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Insurance

• So why do I need insurance?

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Insurance

• So why do I need insurance?
• If this happens
• You will be liable if its your fault

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Credit and Consumerism

• Need help with the terminology?
• Go to
• http//www.investorwords.com/

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So what do I have to do?

• Do the Insurance Worksheet.
• Do the Credit Score Worksheet.
• Do the Buying A Car Worksheet.
• Do the Insurance Worksheet.

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Essay

• In preparing to be financially sound it is
  necessary to be cautious in all your
  transactions.
• How has the lesson you have just completed
  altered your point of view when approaching a
  transaction?
• What other transactions might you approach
  differently given what you now know?

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Post Questions

• What does budgeting have to do with my spending?
• What type of insurance do I need?
• Why is my credit score important?
• What are the risks and rewards of credit cards?
• Do I really have to know anything about financing
  to buy a car?