BU223 Lecture Notes - Lecture 4: Major Force, A.D. Vision, Debit Card
Document Summary
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. Finally, the steps in avoiding and correcting credit mistakes are outlined. Credit is an arrangement to receive cash, goods, or services now and pay for them in the future. Consumer credit is borrowing money to obtain goods and services by individuals and families for personal needs. All economists recognize consumer credit as a major force in the north american economy.
