Presentation Plus! Economics: Today and Tomorrow
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CHAPTER FOCUS
SECTION 1 Americans and Credit
SECTION 2 Sources of Loans
and Credit
SECTION 3 Applying for Credit
SECTION 4 Government Regulation
of Credit
CHAPTER SUMMARY
CHAPTER ASSESSMENT
3
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Why It’s Important
How do credit cards work? What happens
if you can’t pay back the amount of credit
you’ve borrowed? This chapter will
explain what you need to know before
applying for credit and going into debt;
and how to use credit wisely.
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listen to Why It’s Important.
4
Chapter Overview
Chapter 4 explains the advantages of
buying items on credit and why people
decide to use credit; six types of lending
institutions; how credit ratings are
determined; and borrowers’ responsibilities.
5
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Reader’s Guide
Section Overview
Section 1 explains or describes the importance
and uses of consumer credit and loans in the
economy, the advantages of repaying loans over
the long term, and why and how consumers decide
to use credit. 
Objectives
– What are the advantages of repaying
installment debt over a long period? 
– Why do people go into debt? 
– What factors should you consider when
deciding whether or not to use credit?
7
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information. Section 1 begins on page 83 of your textbook.
Reader’s Guide (cont.)
Terms to Know
– credit 
– principal 
– interest 
– installment debt 
– durable goods 
– mortgage
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listen to the Cover Story.
8
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information. Section 1 begins on page 83 of your textbook.
Introduction
• Americans use credit to make many
purchases. 
• The total amount of funds borrowed and
lent each year is enormous. 
• In addition to individuals borrowing funds,
the federal, state, and local governments
all borrow funds, too. 
• The nation’s economy, in fact, depends on
individuals and groups being able to buy
and borrow on credit. 
• In this section, you’ll learn what credit is
and why people use it.
9
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Lecture Launcher
• In 2001, the typical American household
carried an average credit card balance of
$7,500. 
• What is a credit card? 
• What kinds of things might you purchase
with a credit card?
10
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What Is Credit?
• To receive funds for services or goods
with the intent of paying back those
funds in the future. 
• Principal is the amount originally
borrowed, and interest is the amount
added on for the privilege of borrowing.
11
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Discussion Question
Why do lenders such as banks
charge interest?
They must pay interest to their
depositors or investors as well as
finance the services of the bank.
12
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Installment Debt
• A loan paid back in equal payments over
time 
• Used for purchase of durable goods or
manufactured products that last over
three years 
• Longer payback periods have lower
payments but higher total interest. 
• Mortgages on houses are a popular form
of installment debt.
13
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Installment Debt (cont.)
Figure 4.1
Increase in Borrowing
More and more
Americans are
choosing to buy
durable goods
on credit.
Installment Debt (cont.)
Figure 4.2
Pay Now or Pay Later
Your monthly payment
is lower if you choose
the 36-month loan.
Discussion Question
When might it be better to have a
longer payback period?
A shorter payback period?
A longer payback period is helpful
when your finances are limited and
you can only make small payments.
If you have more income it is better to
take the shorter payback period,
make the larger payments, and pay
less total interest.
16
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Why People Use Credit
• As a necessity when buying durable
goods 
• To satisfy an immediate need

• To avoid waiting to enjoy the product 
• To spread the payments out over the
lifetime of the product
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Discussion Question
What items do you consider true
needs and would consider
borrowing money in order to
purchase? 
What items do you think you should
save your money to buy?
Answers will vary, but students
should consider the definition of need
and realize that their needs may
include wants and unnecessary
luxury items.
18
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Deciding to Use Credit
• Consider the benefit of having the
product now instead of later. 
• Consider costs of interest and inability to
buy other items. 
• You do not have to accept every offer of
credit.
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Discussion Question
Many Americans get into debt by
borrowing money to buy items that
are not true necessities.
How can you avoid getting into this
kind of financial trouble?
I can try to never borrow money for
non-necessities. Also, I will only
borrow money that I know I can pay
back.
20
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Section Assessment
What are the advantages of
repaying installment debt over a
long period?
It allows people to buy and use
durable goods, paying in small
monthly payments rather than with a
large lump sum that they may not
have. Also, it allows people to borrow
cash for immediate needs and pay
back the debt in installments.
21
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Section Assessment (cont.)
Why do people go into debt?
People go into debt because they
feel they must purchase certain items
right away, to spread the payments
over the life of the item being
purchased.
22
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Section Assessment (cont.)
Graphic Organizer Create a
diagram like the one on page 87 of
your textbook to list the factors you
should consider when deciding
whether to use credit.
Answers will vary.
23
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Section Assessment (cont.)
Opportunity Costs Think of an item
that you have been saving for. How
long will it take you to save the funds
needed to purchase this item? What
are you giving up buying in the
meantime? Explain why you are
giving up buying that particular item.
Answers will vary.
24
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Section Close
You have been invited to write an
article, titled “How I Make Wise
Credit Choices,” for a consumer
magazine. Develop an outline for
this article.
25
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Reader’s Guide
Section Overview
Section 2 describes the credit choices available to
consumers and how to calculate annual
percentage rates and finance charges. 
Objectives
– What are the six types of financial institutions? 
– What three kinds of charge accounts are
available from stores? 
– How are credit cards used? 
– How do a finance charge and an annual
percentage rate differ?
27
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information. Section 2 begins on page 88 of your textbook.
Reader’s Guide (cont.)
Terms to Know
– commercial bank 
– savings and loan association 
– savings bank 
– credit union 
– finance company 
– charge account 
– credit card 
– finance charge 
– annual percentage rate (APR)
Click the Speaker button to
listen to the Cover Story.
28
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information. Section 2 begins on page 88 of your textbook.
Introduction
• There are two major types of credit–
using credit cards and borrowing money
directly from a financial institution. 
• Although lending institutions differ in their
services, they all charge interest on the
funds they lend. 
• In this section, you’ll learn what those
financial institutions are. You’ll also learn
about charge accounts and credit
cards—and why you should be aware of
the high interest rates they charge.
29
Lecture Launcher
• In January 1995, Eli Broad bought a
cartoon painting at Sotheby’s for $2.5
million, paying with his American Express
card. He even got the frequent flyer
miles for the purchase —a total of 25
first-class trips cross-country. 
• In what other way might Eli Broad have
paid for the painting? 
• Do you think the average person can
charge $2.5 million on a credit card?
30
Types of Financial Institutions
• Commercial Banks offer the widest range
of services. 
• Savings and Loan Associations often
have lower interest rates than
commercial banks. 
• Savings Banks were created to serve
small savers who weren’t being served
by larger commercial banks.
31
Types of Financial Institutions (cont.)
• Credit Unions are owned and operated
by their members; generally have higher
interest rates for savings and lower rates
for loan. 
• Finance Companies collect debt for
stores’ installment loans; generally have
very high interest for loans.
32
Discussion Question
Compare two of the types of
financial institutions.
Which would offer better service for
a corporation?
A young student who is trying to
save money?
The corporation would do best with the
Commercial Banks; a young student
would do best with a Savings and Loan
Association or a Savings Bank.
33
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Charge Accounts
• Enable consumer to buy something and
pay for it later 
• Regular charge accounts have credit
limits, a 30 day billing cycle, and charge
no interest if the bill is paid in-full each
month. 
• Revolving charge accounts have a
minimum payment due each month and
interest is charged on the outstanding
balance.
34
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Charge Accounts (cont.)
• Installment charge accounts require equal
payments spread over time and part of
each payment goes to principal and part
to interest.
35
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Discussion Question
Look at the following list of
purchases. What type of charge(s)
could be used for each? If more
than one could be used, which is
better and why?
– car 
– dress 
– airplane tickets

– a new television 
– dinner at a restaurant 
– a new couch
36
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Discussion Question
car: installment plan; dinner: regular
charge or revolving charge, regular
charge is better because you won’t be
paying for that dinner over the next 6
months and there is no interest; couch:
installment plan or revolving charge,
the better choice is the one with less
interest; dress, airplane tickets, and
television: revolving charge or regular
charge, the regular charge is better
because there in no interest.
37
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Credit Cards
• Can be used in many different stores and
places 
• Have high interest rates due to the large
number of delinquent loans 
• Some offer lower rates with special
conditions to attract customers.
38
Discussion Question
Explain why a credit card is better
than a store card, even if it has a
higher interest rate.
The credit card can be used in many
different places. This not only means it
can be used for a greater variety of
products, but it also enables the
consumer to comparison shop
between competing stores.
39
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Finance Charges and Annual
Percentage Rates
• A finance charge is the entire cost of
borrowing including interest and all fees. 
• Finance charges can be computed in 4
different ways. 
• The Annual Percentage Rate is the cost of
credit expressed as a yearly percentage.

• Knowing the APR allows consumers to
compare costs regardless of dollar
amounts or length of credit agreement.
40
Finance Charges and Annual
Percentage Rates (cont.)
Figure 4.10
Computing APR
Suppose that you
charge $200 worth of
clothes. The interest
rate charged to you,
let’s say, is 10 percent,
but the annual fee for
the credit card is $5.
Your APR will be $20
of interest plus the $5 fee, or 12½ percent. The APR is
normally larger than the interest rate because it includes
the noninterest cost of extending credit
Discussion Question
Explain the different methods of
computing finance charges. Which
method would you prefer as a
consumer and why?
Interest can be charged on the
previous balance, the average daily
balance, the adjusted balance, or the
past-due balance. I would prefer to
only pay interest on the past-due
balance. This way if I pay the bill on
time, I will not pay any interest
charges.
42
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Debit Cards
• Debit cards are not a loan. 
• Debit cards transfers funds directly from
person’s bank account to the store.
43
Discussion Question
Why do you think debit cards were
so unpopular for so long?
Possible response: People did not
trust the banks to only deduct the
amount charged; it has taken time for
people to trust electronic fund
transfers. People were used to writing
checks and did not see a need to use
debit cards.
44
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Section Assessment
Graphic Organizer Create a
diagram like the one on page 94 of
your textbook to list the six types of
financial institutions and describe
their main services.
Commercial bank–checking, savings and loans,
transfer funds. S&L–accepts deposits and lends funds,
finances mortgages and auto loans. Savings bank–
home mortgages, personal and auto loans, checking
accounts. Credit union–savings accounts and lowinterest loans only to members. Finance company–
takes over contracts for installment debts from stores.
Consumer finance company–high-interest loans
directly to consumers.
45
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Section Assessment (cont.)
What three kinds of charge
accounts are available from stores?
Some stores offer regular, revolving,
and installment charge accounts.
46
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Section Assessment (cont.)
How are credit cards used?
They allow a person to make
purchases at many kinds of
businesses without paying cash.
47
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Section Assessment (cont.)
How do a finance charge and an
annual percentage rate differ?
A finance charge is the cost of credit
expressed in dollars and cents. An
APR is the cost of credit expressed
as a yearly percentage.
48
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Section Assessment (cont.)
Annual Percentage Rates What
would be the APR if you charged
$1,000 on a credit card whose
interest rate was 20 percent with an
annual fee of $30?
The APR would be 23 percent.
49
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Section Close
Discuss the following: What is the
importance of having a choice of
lending institutions and knowing
the cost of credit?
50
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Reader’s Guide
Section Overview
Section 3 explains or describes the factors that
establish a person’s credit rating, the difference
between a secured loan and an unsecured loan,
and the responsibilities a borrower assumes on
taking out a loan. 
Objectives
– What four factors determine a person’s credit
rating? 
– What are your responsibilities as a borrower?
52
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information. Section 3 begins on page 96 of your textbook.
Reader’s Guide (cont.)
Terms to Know
– credit bureau 
– credit check 
– credit rating 
– collateral 
– secured loan 
– unsecured loan
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listen to the Cover Story.
53
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information. Section 3 begins on page 96 of your textbook.
Introduction
• How can you obtain credit? 
• Perhaps more important, how can you dig
yourself out of debt if you’ve spent more
than you can handle? 
• In this section, you’ll learn what makes a
person a good risk for credit. You’ll also
learn ways to handle your debts before
they get out of control.
54
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Lecture Launcher
• When Robert Townsend needed to
finance his first movie, Hollywood
Shuffle, he raised most of the funds by
using his credit cards. Unlike other
loans, when applying for a credit card
you are not asked how you will spend the
money. 
• How do you think credit card applicants
are evaluated?
55
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Creditworthiness
• Fill out an application. 
• The agency, store, or bank hires a credit
bureau to do a credit check.
56
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Discussion Question
Do you think that banks, stores,
and other money lending
institutions should have the right to
do a credit check on someone
seeking funds?
Why or Why not?
Answers will vary, but students
should discuss risks involved in not
doing the checks, and if they think a
credit check invades a person’s
privacy.
57
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The Credit Rating
• Tells how risky it is for a bank to lend
someone money 
• Considers a person’s income, debt,
character, and personal wealth 
• Secured loans are backed up with
collateral in the event of non-payment. 
• Unsecured loans need no collateral, but
sometimes require a cosigner who
becomes responsible for repaying the
loan in event of non-payment. 
58
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Discussion Question
Discuss the factors a bank would
consider if you applied for a loan.
What factors make you
creditworthy?
What factors make you a risk?
Answers will vary, but students
should discuss their income, debt,
character, credit history, and personal
wealth. Students should
demonstrate an understanding of
how each of these factors can help or
hurt their creditworthiness.
59
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Responsibilities as a Borrower
• Pay on time. 
• Repay all of your debts, or suffer the
consequences of a bad credit history. 
• Keep records so as not to go over your
credit limit. 
• If debt becomes unmanageable,
concentrate on paying high-interest debts
first, and try to pay more than the
minimum amount required.
60
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Discussion Question
How does bad credit hurt
everyone?
When people do not pay their loans,
the banks lose money. Banks then
charge higher interest rates to other
consumers to make up for the loss.
Also, if more people don’t pay their
loans the banks have greater risk for
each borrower. This can make it
increasingly difficult to borrow money.
61
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Section Assessment
Graphic Organizer Create a
diagram like the one on page 99 of
your textbook to describe the four
factors that determine a person’s
credit rating.
The four factors are credit history,
capacity to pay, character, and
collateral.
62
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Section Assessment (cont.)
What are your responsibilities as a
borrower?
Your responsibilities are to pay debts
on time, to keep complete records of
all charges made, and to notify card
issuers immediately if cards are lost
or stolen.
63
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Section Assessment (cont.)
Creditworthiness Which of the four
factors determining a person’s
credit rating do you think is most
important in deciding whether a
person is creditworthy? Explain.
Answers will vary.
64
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Section Close
Suggest a slogan for a campaign
encouraging consumers to be
responsible borrowers.
65
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Reader’s Guide
Section Overview
Section 4 describes state usury laws and federal
laws that regulate the credit industry and explains
why a person who cannot repay debts might file
for bankruptcy. 
Objectives
– How has the Equal Credit Opportunity Act
affected consumer credit? 
– What are the state usury laws? 
– Why might a person declare personal
bankruptcy?
67
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information. Section 4 begins on page 101 of your textbook.
Reader’s Guide (cont.)
Terms to Know
– usury law 
– bankruptcy
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listen to the Cover Story.
68
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information. Section 4 begins on page 101 of your textbook.
Introduction
• To protect consumers, the federal and
state governments regulate the credit
industry. 
• Some states have set a maximum on the
interest rates charged for certain types of
credit. 
• The federal government has also passed
laws designed to increase the flow of
credit information to consumers. 
• In this section, you’ll learn about these
laws and how they protect consumers
from unfair credit practices.
69
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Lecture Launcher
• In 1985, Hawkeye Pipe Services, Inc.
went out of business. Its founder, Bill
Bartmann, owed over $1 million. It took
him two years to repay his creditors.
Today Bartmann is president of a debtcollection agency. 
• What can a debt-collection agency do to
try and collect payments?
70
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The Truth in Lending Act
• The first law that expanded the
government’s role in protecting users of
consumer credit 
• Ensures that consumers are fully informed
about costs and conditions of borrowing
71
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Discussion Question
Why do you think the government
needs to be involved in protecting
users of consumer credit?
Some outside body needs to regulate
credit to see that both consumers
and lenders are protected from
abuses.
72
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The Equal Credit Opportunity Act
• Creditors cannot discriminate solely on
basis of race, religion, national origin,
gender, marital status, or age. 
• After 1974, a woman no longer had to have
her father or husband sign for her to get a
credit card or other loan.
73
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Discussion Question
How does the Equal Credit
Opportunity Act affect you? Does
this mean you will automatically be
approved for credit?
Why or why not?
74
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Discussion Question
It prevents a creditor from
discriminating against me due to my
race, religion, national origin, gender,
marital status, or age. I will not
automatically be approved for credit.
My creditworthiness will be the main
factor in determining whether or not I
am approved for a loan.
75
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State Usury Laws
• Restrict the amount of interest that can
be charged for credit, setting up
maximum interest rates. 
• Interest ceilings can lead to a shortage of
credit if general interest rates rise, hurting
both the lender and the consumer.
76
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Discussion Question
Why do you think it is important that
states can set their own interest
ceilings instead of having it be the
same nationwide?
The average income varies greatly by
state; therefore different states need
to be able to help their consumers
and banks within their economy.
77
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Personal Bankruptcy
• For people who absolutely cannot repay
their debts 
• Debtors give up most of what they own to
be distributed among creditors. 
• Creditors are forced to forgive entire
debt. 
• It remains on a person’s credit history for
10 years.
78
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Discussion Question
Declaring personal bankruptcy can
help people who have gotten into
serious trouble with debt. However,
bankruptcy is a very serious matter.
Explain the reasons why it should
only be considered as a last resort.
79
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Discussion Question
It is poor ethics to borrow money and
not repay it—in essence this is akin
to stealing. It remains on your credit
history for 10 years. During that time
it will be impossible or difficult to
borrow any money at reasonable
rates. At the end of that time you’ll
have no credit history and it will be
equally difficult.
80
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Section Assessment
What are state usury laws?
State usury laws are state laws that
set limits on the amount of interest
lenders may charge.
81
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Section Assessment (cont.)
Why might a person declare
personal bankruptcy?
A person may declare bankruptcy
because he or she has too many
loans, used too many credit cards,
and piled up unpayable debt.
82
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Section Assessment (cont.)
State Usury Laws The effect of a
usury law is often a shortage of
available loans. What circumstances
might create a surplus of available
loans?
If interest rates are too high, fewer
people will demand loans offered by
many creditors.
83
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Section Close
Discuss the importance of credit
regulation laws for consumers.
84
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Section 1: Americans and Credit
• Credit is the receiving of funds either
directly or indirectly to buy goods and
services today with the promise to pay for
them in the future. 
• The amount owed–the debt–is equal to the
principle plus interest. 
• Many people buy durable goods and obtain
mortgages using installment debt. 
• People go into debt because they do not want
to wait to purchase an item with cash, and they
want to spread the debt payments over the life
of the item being purchased.
86
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Section 2: Sources of Loans
and Credit
• The major financial institutions that lend
consumers funds include commercial banks,
savings and loan associations, credit
unions, and finance companies. 
• A charge account allows a customer to buy
goods or services from a particular company
and pay for them later. 
• A credit card, often charging high interest,
may be used at stores, restaurants, or other
businesses.
87
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Section 2: Sources of Loans
and Credit (cont.)
• Finance charges tell you the monthly cost of
credit in dollars and cents. 
• The annual percentage rate tells you the
annual cost of credit in percentages.
88
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Section 3: Applying for Credit
• After you have filled out a credit application, a
credit bureau will perform a credit check
and determine your credit rating. 
• Before granting you credit, a creditor looks at
your capacity to pay, your character, and any
collateral you may have. 
• Your responsibilities as a borrower include
paying on time, keeping records of your debt,
and not spending more than you can repay.
89
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Section 4: Government Regulation
of Credit
• Legislation states that those who provide
credit cannot deny you such credit solely on
the basis of your race, religion, national origin,
gender, marital status, or age. 
• A usury law restricts the amount of interest
that can be charged for credit, but also leads to
a shortage of available credit. 
• People who cannot repay their debts may have
to file personal bankruptcy.
90
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Recalling Facts and Ideas
What do you have to pay when
you borrow?
You have to pay principal plus any
interest and fees.
92
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to display the answer.
Recalling Facts and Ideas (cont.)
How is taking out a loan similar to
buying an item on credit?
In both cases, interest must be paid
for the use of someone else’s
purchasing power.
93
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to display the answer.
Recalling Facts and Ideas (cont.)
What type of goods do people
typically use installment debt
to buy?
Typically people purchase consumer
durables and real property.
94
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to display the answer.
Recalling Facts and Ideas (cont.)
Why do people use credit?
People want or need items
immediately and wish to spread the
payments over time.
95
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to display the answer.
Recalling Facts and Ideas (cont.)
What are the six types of basic
lending institutions in our economy?
They are commercial banks, savings
and loan associations, savings banks,
credit unions, finance companies, and
consumer finance companies.
96
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to display the answer.
Recalling Facts and Ideas (cont.)
What are some of the most common
types of credit cards used today?
They are Visa, MasterCard, and other
cards issued through banks.
97
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to display the answer.
Recalling Facts and Ideas (cont.)
When you take out a loan, what do
you call the total cost of credit
expressed in dollars and cents?
The total costs are called finance
charges.
98
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to display the answer.
Recalling Facts and Ideas (cont.)
When you make an application for a
loan, what are four factors that a
creditor looks at to determine
whether you are creditworthy?
They look at your credit history,
capacity to pay, character, and
collateral.
99
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to display the answer.
Recalling Facts and Ideas (cont.)
What is the difference between a
secured and an unsecured loan?
Secured loans are backed by
collateral; unsecured loans are
made based on the reputation of
the borrower.
100
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to display the answer.
Recalling Facts and Ideas (cont.)
What are your responsibilities as a
borrower?
Borrowers must repay the loan on
time, keep records of charges made,
and notify card issuers promptly if
credit cards are lost or stolen.
101
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to display the answer.
Recalling Facts and Ideas (cont.)
What does the Equal Credit
Opportunity Act of 1974 prohibit?
It prohibits discrimination in lending
based on factors–such as race, age,
and sex–that have no bearing on an
applicant’s ability to repay a loan.
102
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to display the answer.
Recalling Facts and Ideas (cont.)
What are three important federal
laws regulating consumer credit?
Federal laws regulating consumer
credit include the following: Truth in
Lending Act, Fair Credit Reporting
Act, Equal Credit Opportunity Act, Fair
Credit Billing Act, and the Fair Debt
Collection Practices Act.
103
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to display the answer.
Recalling Facts and Ideas (cont.)
How can usury laws be harmful to
the people they are trying to help?
When interest rates in general begin to
rise, many lenders feel they could not
keep within ceilings set by usury laws
and still make a profit. Therefore they
cut back on the amount of credit they
offer. As a result, many consumers,
particularly those who are poor credit
risks, find it hard to obtain credit.
104
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Thinking Critically
Making Comparisons In deciding
whether to pay cash or use credit for a
purchase, what are the costs involved
and the benefits of each choice?
The benefit of buying on credit is being able
to enjoy the good or service now rather than
later. The cost is whatever the borrower
must pay in interest or lost opportunities to
buy other items. The benefit of buying with
cash is that the buyer does not incur debt.
The costs are the time the buyer may have
to wait to buy while saving and the lost
opportunities to buy other items.
105
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Thinking Critically (cont.)
Synthesizing Information Imagine that
you need both a car loan and a home
mortgage. Use a chart like the one on
page 109 of your textbook to help you
decide which of the six types of
lending institutions discussed in this
chapter would be most appropriate for
each loan.
Answers will vary.
106
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Thinking Critically (cont.)
Drawing Conclusions If you declare
personal bankruptcy, your creditors
clearly lose. What ethical concerns
should you have before ever taking
this action?
Answers will vary.
107
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to display the answer.
Reviewing Skills
Using a Database 
• Call various retail stores and gas stations
and ask them to send you a credit card
application. 
• Analyze the applications, then prepare a
database that organizes the answers to the
questions on the following slide.
108
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to display the information.
Reviewing Skills (cont.)
What questions asked on each
application are virtually the same? 
What questions asked on the gas
station applications are different
than those asked on the retail
store applications? 
Were any questions asked that you
think violate the Equal Credit
Opportunity Act? Explain.
109
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to display the next question.
How does a credit card differ from a
debit card?
A credit card allows consumers to make
cashless purchases by giving them access to
loans. A debit card does not provide a loan.
Instead, it makes cashless purchases
possible by enabling customers to transfer
funds electronically from their bank accounts
directly to the business where they
purchased goods.
110
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to display the answer.
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Consider the following Scenario: Two friends have
offered to lend you $1,000 to buy whatever you
want. The first friend would like you to refund the
money within a year, but for every month that goes
by without repayment, he or she will charge you
$10 interest. The second friend places no time limit
on repayment, but will charge you $5 interest for
every month that goes by without repayment.
From which friend, if either, would you
borrow the $1,000?
Click the mouse button to return to the Contents slide.
Explore online information about the
topics introduced in this chapter.
Click on the Connect button to launch your browser and go to the
Economics: Today and Tomorrow Web site. At this site, you will find
interactive activities, current events information, and Web sites
correlated with the chapters and units in the textbook. When you
finish exploring, exit the browser program to return to this
presentation. If you experience difficulty connecting to the Web site,
manually launch your Web browser and go to
http://glencoe.com/sec/socialstudies/economics/econtoday2005/
index.php
Explore online information about the
topics introduced in this chapter.
Click on the Connect button to launch your browser and go to the
BusinessWeek Web site. At this site, you will find up-to-date
information dealing with all aspects of economics. When you
finish exploring, exit the browser program to return to this
presentation. If you experience difficulty connecting to the Web
site, manually launch your Web browser and go to
http://www.businessweek.com
History: Savings and Loans
Oxford Provident Building Association, founded
in Frankfort, Pennsylvania, in 1831, was the first
savings and loan association in the U.S. At that
time, American commercial banks, for the most
part, dealt only with businesses. Oxford
Provident, however, provided a place for
ordinary individuals to invest and borrow.
Literature: Punishing
Debtors
In the past, failure to pay debts was a
punishable offense, often by public humiliation.
In England, for example, debtors in the 1600s
were put in the stocks. In the 1800s, English
debtors had their names published prominently
in popular newspapers. People with chronic
debt problems usually were thrown in prison
until their debts were paid. Imprisonment for
debt remained on the statute books until 1869.
A Hard Lesson
on Credit Cards
Approximately 75 percent of college students
carry and use at least one credit card. And 25
percent of these students reported that they
obtained their first card while still in high school.
Read the BusinessWeek Spotlight on the
Economy article on page 100 of your textbook.
Learn how to avoid the many common traps that
credit cards can set.
Continued on next slide.
This feature is found on page 100 of your textbook.
A Hard Lesson
on Credit Cards
How are students enticed to get
credit cards?
Students are offered free T-shirts or
chances to win airline tickets.
Continued on next slide.
Click the mouse button or press the Space Bar to display the
answer. This feature is found on page 100 of your textbook.
A Hard Lesson
on Credit Cards
Describe six ways to avoid credit
card debt.
Ways to avoid credit card debt include: avoid
cards with low initial APRs, pay on time, do not
use the card for cash advances, do not ask for a
higher line of credit, get a credit card that allows
only a small monthly balance and a charge card
that must be paid of monthly, and pay cash for
everyday items, such as gasoline and pizza.
Click the mouse button or press the Space Bar to display the
answer. This feature is found on page 100 of your textbook.
Continued on next slide.
Continued on next slide.
Continued on next slide.
Continued on next slide.
Economics and You
Video 10: Going Into Debt
After viewing Going Into Debt, you should be
able to… 
• explain how credit cards and debit cards
work. 
• explain how loans work and distinguish
between secured and unsecured loans.
Continued on next slide.
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to display the information.
Economics and You
Video 10: Going Into Debt
Disc 1, Side 1
Chapter 10
Click the Videodisc button
anytime throughout this
section to play the complete
video if you have a videodisc
player attached to your
computer.
Click the Forward button to
view the discussion questions
and other related slides.
Click inside the box to play the preview.
Continued on next slide.
Economics and You
Video 10: Going Into Debt
What is the difference between a
secured and an unsecured loan?
A secured loan is backed with
collateral. If the loan is not paid back,
the bank can claim the collateral. An
unsecured loan is issued on the
basis of a person’s reputation and
Disc 1, Side 1
does not require collateral.
Chapter 10
Click the mouse button or press the Space Bar
to display the answer.
The Federal National Mortgage Association, or
Fannie Mae, is the nation’s largest provider of
funds for home mortgages. Fannie Mae does
not lend money directly to home buyers. Rather
it purchases mortgages from lending
institutions. These lenders then use the money
to provide mortgages to home buyers. Since it
became a private company in 1968, Fannie
Mae has helped more than 49 million American
families to buy homes.
Credit Card Issuers
Debit Cards
Many credit card issuers try to attract customers by
offering affinity cards. These are regular credit
cards that are issued under the name of an
organization–a charity, educational institution, or
professional body, for example. The issuing
companies assume that people with ties to–or an
affinity with–these organizations will take one of the
cards. In return, the issuing companies make small
donations to the organizations whenever the cards
are used for transactions.
There are nearly 250 million debit card holders in
the United States. Debit card transactions total
about $400 billion a year.
Kenneth Chenault
1951–
Click the picture to listen to
the selection on page 106
of your textbook to find out
more about Kenneth
Chenault. Be prepared to
answer questions that
appear on the next two
slides.
This feature is found on page 106 of your textbook.
Kenneth Chenault
1951–
What, according to
Kenneth Chenault, is
the key to success?
He says the key is what you do
in your job, rather than what you
know or who you know.
Click the mouse button or press the Space Bar to display the
answer. This feature is found on page 106 of your textbook.
Kenneth Chenault
1951–
What advice does
Chenault give people
for confronting and
overcoming obstacles?
People should isolate what they
cannot control, such as people’s
biases. Then they should focus on what they can
control–their own performance, their own behavior,
and the values they choose to uphold. In addition,
he thinks it is important for people to cultivate a
measure of resilience and to learn from failure.
Click the mouse button or press the Space Bar to display the
answer. This feature is found on page 106 of your textbook.
End of Custom Shows
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shows and return to the main presentation.
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