this homework for Adrian Monroe so please don't send me MSG

CHAPTER OVERVIEW

This chapter defines consumer credit and analyzes its advantages and disadvantages. The importance of consumer credit in our economy is explained and uses and misuses of credit are discussed. Financial and personal opportunity costs of using credit are emphasized. Next, two types of consumer credit—closed-end credit and open-end credit—are differentiated. Then, general rules of measuring credit capacity such as debt payments-to-income ratio and debt-to-equity ratio are explained. This is followed by coverage of building and maintaining a credit rating. Next, the information that creditors look for in granting or refusing credit is identified, and the Equal Credit Opportunity Act is explained. Then, the steps in avoiding and correcting credit mistakes are outlined, and the provisions of the Fair Credit Billing Act are described. Finally, strategies for complaining about consumer credit are introduced and the major consumer credit laws are summarized.

LEARNING OBJECTIVES

CHAPTER SUMMARY

After studying this chapter, students will be able to:

My Life Obj. 1	Define consumer credit and analyze its advantages and disadvantages.	Consumer credit is the use of credit by individuals and families for personal needs. Among the advantages of using credit are purchasing goods when they are needed and paying for them gradually, meeting financial emergencies, achieving convenience in shopping, and establishing a credit rating. But credit costs money, encourages overspending, and ties up future income.
My Life Obj. 2	Differentiate among various kinds of credit.	Closed-end and open-end credit are two types of consumer credit. With closed-end credit, the borrower pays back a onetime loan in a specified period of time and with a specified number of payments. With open-end credit, the borrower is permitted to take loans on a continuous basis and is billed for partial payments periodically.
My Life Obj. 3	Assess your credit capacity and build your credit rating.	Two general rules of thumb for measuring credit capacity are the debt payments-to-income ratio and the debt-to-equity ratio. In reviewing your credit-worthiness, a creditor seeks information from one of the three national credit bureaus or a regional credit bureau.
My Life Obj. 4	Describe the information creditors look for when you apply for credit.	Creditors determine credit-worthiness on the basis of the five C’s: character, capacity, capital, collateral, and conditions.
My Life Obj. 5	Identify the steps you can take to avoid and correct credit mistakes.	If a billing error occurs on your account, notify the creditor in writing within 60 days. If the dispute is not settled in your favor, you can place your version of it in your credit file. You may also withhold payment on any defective goods or services you have purchased with a credit card as long as you have attempted to resolve the problem with the merchant.
My Life Obj. 6	Describe the laws that protect you if you complain about consumer credit.	If you have a complaint about credit, first try to deal directly with the creditor. If that fails, you can turn to the appropriate consumer credit law. These laws include the Truth in Lending Act, the Consumer Leasing Act, the Equal Credit Opportunity Act, the Fair Credit Billing Act, and the Fair Credit Reporting Act.