Agribusiness Library

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Agribusiness Library

• Lesson L060020 Evaluating Sources of Credit

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Objectives

• 1. Compare and contrast the sources of personal
  or business loans.
• 2. Describe the function of credit cards, and
  investigate the advantages and disadvantages of
  credit card use.
• 3. Describe charge accounts.

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Terms

• Average daily balance
• Banks
• Charge account
• Credit card
• Credit unions
• Installment plan
• Revolving credit account

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What are the sources of personal or business
loans, and how arebanks and credit unions
different?

• When searching for a loan,
  businesses and individuals have
  choices.
• Banks and credit unions can
  provide short-, intermediate-,
  
  and long-term loans.

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What are the sources of personal or business
loans, and how arebanks and credit unions
different?

• A. Banks are entities that are in
  the business of making a
  profit.
• They provide loans to other
  businesses and individuals
  and
  charge interest on these services to
  make a profit.
• This does not mean that banks do not care about
  their customers.
• Without sound financial decisions and
  investments, banks would quickly be out of
  business.

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What are the sources of personal or business
loans, and how arebanks and credit unions
different?

• B. Credit unions are non-profit organizations
  that are owned by the customers and operate to
  provide the best possible services and products
  to their members.
• Credit unions are managed by a board of
  volunteers that make decisions that will best
  benefit the members.
• Because they are typically smaller than banks,
  credit unions may not offer all of the same
  products or services.
• Since credit unions are owned by the customers,
  businesses are not usually members of credit
  unions they find banks better suited to their
  needs.

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How are credit cards used?

• A credit card is a plastic card
  with owner information that
  is used to conduct a
  credit
  transaction.
• A. Many department stores
  and financial institutions offer
  credit cards.
• B. Most credit cards use a revolving credit
  account the cardholder can pay the full amount
  or a minimum monthly payment.

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How are credit cards used?

• C. If minimum payment is made, finance charges
  begin on the unpaid balance.
• Finance charges on credit cards are typically
  high.
• As a result, the more unpaid balance that is left
  each month, the more interest that will be
  charged on that amount.
• D. The cardholder can continue using the account
  until the credit limit is reached.

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How are credit cards used?

• E. Finance charges are usually charged on the
  average daily balance, which is the balance
  carried forward plus any new purchases.
• Failure to make a monthly payment may allow the
  credit card company to increase the finance
  charges, resulting in even more interest and a
  higher amount to pay the following month.

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What is a charge account?

• A charge account is extended by retailers to
  those who purchase products from them.
• Charge accounts make purchasing the product more
  convenient for the consumer and are typically
  used by customers who commonly purchase many
  items daily or weekly at the same business.

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What is a charge account?

• A. For example, instead of paying for
  fuel at each visit, the gas station
  keeps an account of
  how much is owed by the
  customer.
• Typically, a monthly bill is mailed to the
  customer for payment.
• To make it more convenient for customers,
  interest is usually delayed for
  a certain
  period of time.
• After this period has passed, the business may
  charge interest on any unpaid portion of the
  account.
• Because most businesses are not able to survive
  long with large amounts of money waiting to be
  repaid, this type of credit may carry extremely
  high interest rates for unpaid balances.

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What is a charge account?

• B. Charge accounts can sometimes be repaid using
  installment plans.
• An installment plan would allow
  a customer to make a set
  payment
  each month on the account rather
  than paying the amount in
  full.
• Even with an installment plan,
  some businesses may
  charge
  interest on the unpaid amount.

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REVIEW

• What are the sources of personal or business
  loans, and how are banks and credit unions
  different?
• How are credit cards used?
• What is a charge account?