CREDIT CARDS AND

CONSUMER LOANS

GE 4 – Mathematics in the Modern World

Questions to Consider
 What is credit?
 Does credit cost?
 What are the advantages of using credit?
 What happens if I
misuse credit?
Credit
 Understanding the concept of credit or
“utang” in the Philippines has yet to
reach its maturity as reflected by the
stigma surrounding it. The word
“utang” is still perceived to be
synonymous with financial hardship,
mismanagement, and vulnerability.
This shouldn’t be the case as credit is
a tool for financial upliftment that is
essential for daily life.
Credit
 A legal agreement to receive cash, goods,
or services now and pay for them in the
future.
History of Credit Reporting
 Born over 100 years ago
 1960s – reported only negative financial
information
 1971 – Fair Credit Reporting Act (FCRA)
FCRA
 Is a federal law that regulates the collection of
consumers' credit information and access to their
credit reports. It was passed in 1970 to address the
fairness, accuracy, and privacy of the personal
information contained in the files of the 
credit reporting agencies.
https://www.investopedia.com/terms/f/fair-credit-reporting-act-
fcra.asp#:~:text=The%20Fair%20Credit%20Reporting%20Act%20(FCRA)
%20is%20a%20federal%20law,of%20the%20credit%20reporting
%20agencies.
Credit in Philippines
 Consumer Credit in Philippines averaged 202.16
PHP Billion from 2006 until 2020, reaching an all
time high of 456.61 PHP Billion in the fourth quarter
of 2019 and a record low of 76 PHP Billion in the
first quarter of 2006.
https://tradingeconomics.com/philippines/consumer-
credit#:~:text=Consumer%20Credit%20in
%20Philippines%20averaged,the%20first%20quarter
%20of%202006.
Credit in Philippines
 Consumer Credit in Philippines increased to
478.27 PHP Billion in the second quarter of
2022 from 446.07 PHP Billion in the first
quarter of 2022. source: 
Bangko Sentral ng Pilipinas
https://tradingeconomics.com/philippines/consumer-credit#:~:text=Consumer
%20Credit%20in%20Philippines%20averaged,the%20first%20quarter
%20of%202006.
Types of Credit
 Credit Cards
 Installment Loans
 Service Credit
 Revolving Credit
 Student Loans
 IOU
 Single Payment Credit
A. Credit Cards
 Plastic cards with electronic information
that can be used by the holder to make
purchases or obtain cash advances using a
line of credit made available by the card-
issuing financial institution.
Credit Cards
 Plastic cards that lets you access the credit
limit your card issuer gives you. A credit limit
is like a loan. However, instead of giving you
the full loan cash, the bank lets you take a
much of the credit as you want at a time and
allows you to reuse the loan over and over as
long as you pay what you’ve borrowed. –
Latoya Irby (2019)
Credit Cards
 Janet Berry-Johnson(2019) discussed that
APR (Annual Percentage Rate) is one of the
key factors you should consider when
shopping for a credit card. Finding the lowest
rate available to you means comparing offers
and card terms carefully.
Introductory/Promotional APR
 Many cards offer an introductory APR,
usually 0% on balance transfers or purchases
for anywhere from a few months to a year.
This can be super helpful, but make sure you
read the terms and conditions and pay off
your balance before the APR jumps up to its
regular rate.
Regular APR
 After the introductory period, most cards offer a
range of variable APRs depending on your
creditworthiness. Generally speaking, the lower
end of the APR range is reserved for consumers
with good to excellent credit. On the other side of
the token, the higher APRs are for consumers at
the lower end of eligible credit scores. Your
actual rate will be determined by the issuer when
you apply, by looking at your credit scores before
applying may give you a better idea of what to
expect.
Cash Advance APR
 Banks and issuers typically charge a higher rate
for cash advances, and interest accrues the
moment you take the advance – sorry, no grace
period here. For this reason, I recommend
avoiding credit card cash advances whenever
possible.
Penalty APR
 If you miss a payment, the credit card company
may raise your rate in addition to charging you a
late fee. Talk about adding insult to injury.
B. Installment Loan
 A loan in which the amount of payment
and the number of payments are
predetermined, such as an automobile loan.
 Fixed payment
 Set period of time
 Set or varying interest rates
 Examples: Car loans and mortgages
C. Revolving Credit
 A type of credit that does NOT have a fixed
number of payments, such as a credit card.
 No stated payoff time
 Limit to credit
 Minimum monthly payments
 Finance charges
 Example: credit card
D. Service Credit
 A member's earned service, prior service,
and purchased service.
E. Student Loans
 Loans offered to students to assist in
payment of the costs of professional
education. These loans usually charger
lower interest than other loans, and are
also usually issued by the government.
 Allows a person to finance their education
and defer payments until after graduation.
F. IOU
 An IOU (abbreviated from the phrase "I owe
you") is usually an informal document
acknowledging debt. An IOU differs from a
promissory note in that an IOU is not a
negotiable instrument and does not specify
repayment terms such as the time of
repayment.
G. Single Payment Credit
 A shorter term loan that's intended to
be paid back in one lump sum on a date
agreed upon by you and your creditor. The
loan and your payment are typically not
reported to the credit bureaus.
Debit Cards
 Debit cards are plastic cards with
electronic information, that look very
similar to credit cards, that you can
use to take money out against your
checking account.
 When you swipe your debit card
remember that the money is taken
immediately from your checking
account.
Sources of Credit
 Bank
 Credit Union
 Finance Companies
 Retail Stores
 Savings & Loan Asociations
 Internet Stores
How to establish credit
 Bank accounts
 Employment history
 Residence history
 Utilities in borrower’s name
 Department store or gas credit card
How to maintain a good credit rating
 Establish a good credit history.
 Pay monthly balance on time.
 Use credit cards sparingly and stay within
the limit.
 Do not move balance to other cards.
 Check credit report regularly.
Risks of Credit
 Interest
 Overspending
 Debt
 Identity Theft
Responsibilities of Credit
 Know the real cost of debt.
 Don’t use credit to live beyond your means.
 It is all about the details…read the fine
print!
 Pay as much as you can, as early as you
can.
Co-Signer
 The person who agrees to be responsible
for loan payments if the borrower fails to
make them.
Collateral
 A form of security to help guarantee that a
creditor will be repaid.
Advantages Disadvantage
s
 Convenient  It is a loan
 Immediate  Interest rate
 No need for cash  Additional fees
 Zero liability on
 Easy to overspend
fraud  Can promote
impulse purchases
 Helps on
reservations
 Risk of identity
theft
 Bonuses, points  Responsible if lost
Costs of Using Credit
 Finance charges
 Interest
 Late fees
 Default rates
 Closing costs
Warning Signs of Credit Abuse
 Delinquent Payments
 Default Notices
 Repossession
 Collection Agencies
 Judgment Lien
 Garnishment
Financial Consequences of Debt
 Overspending
 Paying high interest rates
 Lowers credit score
 Difficulty getting a loan
Consumer Loan
 Means a secured or unsecured loan given
to consumers for personal, family, or
household purposes, or for consumable
items such as a car, boat, manufacture
home, home equity loan, home equity line
of credit, signature loan, signature line of
credit, and recreational vehicle.
Consumer Loan (cont…)
 I is usually given to on the basis of
borrower’s integrity to pay. It is also called
consumer lending, consumer credit, or
retail lending.
 Must comply with the consumer protection
regulation and they are monitored by
government regulatory agencies.
Stocks, Bonds and Mutual Funds
 A stock is ownership in a company. When you
buy a stock, you buy a piece of the company. So if
the company does well, you do well. Congruently,
if the company tanks, your stocks tanks. Just like
bonds, there are many types of stocks because
there are many different types of companies out
there. Large company stocks, mid cap stock,
small cap stock, international stock, emerging
stock, tech stock.
Stocks, Bonds and Mutual Funds
 Bond is like a loan. You loan your money to the
government or a company, and in return they pay
you interest for the term of that loan. Typically,
bonds are considered conservative types of
investments because you can choose the length
and term of the bond and know exactly how
much money you will get back at the end of the
term or “maturity”.
Stocks, Bonds and Mutual Funds
 Mutual funds represent another way to invest in
stocks, bond or cash alternatives. You can think
of a mutual fund like a basket of stocks or bonds.
Basically, your money is pooled, along with the
money of other investors, into a fund, which then
invests in certain securities according to a stated
investment strategy. The fund is managed by a
fund manager who reports to a board of
directors.
Home ownership or owner
occupancy
 It is a form of housing tenure where a person,
called the owner-occupier, owner -occupant, or
home owner, owns a home in which he/she lives.
This home can be house, apartment,
condominium, or a housing cooperative. In
addition to providing housing, owner occupancy
also functions as a real estate investment.
Outputs:

 Activity 2: Reflection
How can I use Mathematics to gain financial literacy and
profitability?
 Activity 3 : Money-saving blog

Please submit in a pdf format

Sample will be sent in the GC.

Deadline of submission: Nov. 26, 2022 in Google Classroom.