Banking and Credit - 2021

Banking and Credit

Being a good learner

• Stop videos and take notes

• Pay attention to anything that is typed in Canvas (terms and definitions)

• Retake what you can

• econdlowdown, rewatch edpuzzle

Multiple Choice

Describe the difference between secured and unsecured credit

• Unsecured credit enables lenders to seize an asset if a loan is not paid, while secured credit prohibits lenders from taking material objects.

• Secured credit is risky because banks cannot seize assets, while unsecured credit is less risky because it is backed by material objects.

• Unsecured credit is backed by an asset equal to the value of a loan, while secured credit is not guaranteed by a material object.

• Secured credit is backed by an asset equal to the value of a loan, while unsecured credit is not guaranteed by a material object.

Secured Loan

The lender can take a possession if you don't pay.

*Possible lower interest rates because of this.

Credit Cards

Why do people use them if there could be fees, interest, and debt problems?

Secured Loan vs. Secured Credit Card

• Secured Loan - The lender will give me a loan because they feel SECURE

• Why? Because they can take something from me (collateral)

• Secured Credit Card - I give them a set amount of money to actually GET the credit card.

• I can than charge up to that amount.

• The lender feels SECURE because they already have my money.

• It is like collateral upfront, but they can't take my possesions.

• 
  

Discussion Type Questions

• Why would I want to have a secured loan?

• Why would I want to have a secured credit card?

Installment Loan vs. Revolving Credit

• Installment - same payment every month until it is paid off.

• Examples: college loan, car loan, buy new furniture set

• Revolving Credit - can keep borrowing and paying as long as under the limit

• Examples: credit card, store credit cards, gas cards

• If you don't charge for 6 months and you have a $0 balance, then you don't pay.

• Once you charge, you make a payment.

• Or you let it sit, and have a fee and interest for not paying.

Multiple Choice

Which of these credit payback strategies would lead to the HIGHEST interest charges?

• Make the minimum payment every month

• Make the minimum payment every month but you are sometimes late

• Paying your balance in full every month but you are late once or twice per year

Multiple Choice

Federal Deposit Insurance Corporation (FDIC) is

• An insurance that customers buy to protect their money.

• To protect you so that you will not overdraw too much money from your checking account

• Protection for bank customers’ deposits up to $250,000, guaranteeing their money is still available if the bank goes out of business.

• Insurance bank branches can buy to protect their business against fraud and scams.

Multiple Choice

A card provided by a bank that allows a point-of-sale transaction replacing cash and checks.

• debit card

• ATM card

• credit card

• gift card

ATM Card

Used in a cash machine by punching in a code or PIN. Used to deposit or withdraw money.

Multiple Choice

In a banking institution, what type of account provides the highest interest?

• Money Market Savings

• Savings

• Certificate of Deposit

• Checking Account

Why does a CD offer a higher interest rate?

• The loan is for 1,3, or 5 years

• You can't take money out without penalty

• This way the bank can take your money along with others and invest it at a higher interest rate and make money

• ...since it takes longer to make more money

Multiple Choice

What is not true about Credit Unions?

• They offer higher interest rates on savings than regular banks.

• They do not make a profit like regular banks.

• They are insured by the FDIC

• They are owned by the people who use their services.

Insurance at a Credit Union

Federally insured credit unions offer a safe place for you to save your money, with deposits insured up to at least $250,000 per individual depositor.

The National Credit Union Administration (NCUA) is the independent agency that administers the NCUSIF.

Like the FDIC's Deposit Insurance Fund, the NCUSIF is a federal insurance fund backed by the full faith and credit of the United States government. 

Multiple Choice

Tyeon bought a TV now has a $2000 balance on her credit card.

The interest rate (finance charge) on her card is 22%.

She is going to pay $50 each month to pay off her debt.

Use the Credit Card Payoff Calculator

https://www.bankrate.com/calculators/credit-cards/credit-card-payoff-calculator.aspx

How much will she actually be paying for the TV?

• $2,000

• $1,637

• $3,637

• $2,637

Overdraft Protection - Why would you want it?

• You have autodraft payments for your rent and what if you don't have enough money in your account?

• You tend to forget to pay bills on time

• Better to be charged a fee now and then as opposed to defaulting on a loan