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Unformatted text preview: erations Before you use consumer credit, ask yourself: Could I pay cash or make a down payment? Do I want to use savings for this purchase? Is there a comparable, yet cheaper choice? Does purchase fit with my goals and budget? Could I use the credit a better way? Can I postpone this purchase? What are the opportunity costs? What are the dollar and psychological costs?
6 Advantages of Credit You get to buy now Even when funds are low Use for financial emergencies
Convenient when shopping
Safer than cash
Can take advantage of float time
May get cash rebates, airline miles, etc.
Demonstrates financial stability
7 Disadvantages of Consumer Credit Purchases are more expensive
Temptation to overspend
Ties up future income
Possible financial difficulties
Potential loss of merchandise
due to late or nonpayment
8 Types of Credit ClosedEnd Credit (Repaid at Maturity) Mortgage loan Automobile loans Installment and some home equity loans OpenEnd Credit Use as needed until reaching line of credit You pay interest and finance charges if you do not pay the bill in full when due Revolving check credit prearranged loan Open end home equity loan 9 Credit Cards vs. Debt Cards
What do most people use?
What are the advantages/disadvantages of each? 10 Debit Cards Overtake Credit Cards
Billions of US $ 20
$0 Credit Debit Source: Visa Branded Cards
11 Debit Cards Advantages Convenient Don’t have to carry cash or checks Can prevent credit card debt and bad checks Disadvantages Consumer protections...
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- Spring '14