SOCSCI 2PF3 Lecture Notes - Lecture 6: Debit Card, Revolving Credit, Financial Institution
20 Feb 2017
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Improper uses of credit : meet basic living expenses, make impulse purchases, purchase non-durable goods (e. g. restaurant meals) Establish a stable, long-term relationship with a financial institution: opening savings and checking accounts. Use credit: get 1 card and make small purchases, use the car periodically. Obtain a small loan: make regular payments and retire the loan in accordance with the loan agreement. Debt safety ratio = (total monthly consumer credit payments) / monthly take-home pay. Should not exceed 20% of monthly net income. Credit extended to a consumer in advance of any transaction. Consumer can buy/borrow up to a specified amount, the credit limit. Usually, interest can be avoided by paying balance in full. Doesn"t provide line of credit (cid:498)prepaid card(cid:499) = debit card w/ fixed amount (doesn"t access your checking account) Open account credit offered by banks and other financial institutions. Usually offer higher credit lines and lower interest rates than credit cards!
