ch 25-29 credit & budgets (ppt)

Chapters 25, 26, 28, 29
What is Credit?
Chapter 25
• Credit - an agreement to get money, goods, or services
now in exchange for a promise to pay later.
• 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
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
Short Answer
• What are the factors that determine a person’s credit
• How can using credit cards be very costly to the
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 – 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)– Determines the cost of
your yearly credit.
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 – When a creditor takes all or part of
your paycheck.
• Repossess – To take back collateral.
Short Answer
• 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 - The total amount of money you earned for a
specific time.
• 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 – Expenses occurring regularly and are
regularly paid.
• Variable Expenses – Expenses that fluctuate or are
• Budget Variance – The difference between how much you
planned to spend and how much you actually spent.
Short Answer
• 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 – Account that earns interest on
your account’s balance.
• 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 – 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 – A checkbook log where you keep track of all
• Endorsement – 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 – Checks you’ve written that have been
• Bank Reconciliation – The process of seeing whether your
records agree with the bank’s records.
• Outstanding Checks – Checks that have been written but
not yet cashed.

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