GRADE IX (O Levels)

LECTURE 1
SOUTH: 3rd Period
(Monday 28th Jan 2013)
NORTH: 7th Period
(Monday 28th Jan 2013)

CHAPTER 10

CONSUMER
CREDIT

Introduction
Credit is an arrangement by which a buyer
can take possession of something now
and pay for it later or over time.

Reasons for giving Credit

To gain competitive edge.

To earn additional money.
To sell a very expensive items.
When the product sales is on decline.

Matters discussed in
the agreement
1.
2.
3.
4.
5.
6.
7.
8.

Details about the buyer and seller

Details of the asset to be bought/sold
Amount of finance
Repayment period
Monthly installment
Interest rate charged
Collateral security involved
Rights and responsibilities of both
parties

Credi
t
Long
Term

Leasin
g
Hire
Purcha
se

Extend
ed
Credit
Sale
&
Leas
e
Back

Ban
k
Loa
n

Inform
al
Credit

Short
Term
Credi
t
Card

Over
draft

Absentees:
__________________________________________
__________________________________________
__________________________________________

Remarks:
__________________________________________
__________________________________________
__________________________________________

GRADE IX (O Levels)
LECTURE 2
SOUTH: 4th & 5th Period
(Tuesday 29th Jan 2013)
NORTH: 5th & 6th Period
(Wednesday 30th Jan 2013)

Short Term Credit

The amount of credit is low.

Credit is to be paid within one year.

Informal Credit

Credit is given without any written

agreement.
Does not involve collateral security.
Small amounts are involved.
Repayment is to be made within one
year.
Normally offered by the retailer to their
trustworthy customer

Credit Cards

1.
2.
3.
4.
5.

A plastic card with a magnetic tape or with

a micro chip on it issued by commercial
banks to their credit worthy customers on
request.
These can be used for making payment at
selected retailers or for drawing cash from
selected ATMs upto a certain limit.
Features:
Plastic Card.
Magnetic tape.
Name of card holder.
Card number.
Validity date.

Advantages:
Advantages to Card Holder:
Increases

purchasing power.
Minimum cash handling.
Obtain cash at ATM.
Can be canceled when stolen.
Postponement of payment.

Advantages to Bank:
Interest

from card holder.

Commission from retailer.

Advantages to Retailers:
More

sales.
Competitive edge.
Minimum cash handling

Disadvantages:
Disadvantages to Card Holders:
Limited

acceptability.
Interest is charged.
Irrational buying.
Every one can not have this facility.
Can be misused.

Disadvantage to Bank:
Recovery

of money from defaulters.

Disadvantages to Retailer:
Commission

and rental to be paid to

the bank.
Problem of limited cash.

Over Draft

A short term facility offered by the

bank to the its customers where the
borrower
can over draft (withdraw money
more than their balance) their
accounts maintained with the banks.
Available only for current accounts.
Used by businesses to manage cash
flow problems.

Long Term Credit

Amount of Credit is large.

Repayment goes beyond one
year.
Repayment is made in
installments.
A written agreement is singed.
Collateral security are involved.

Absentees:
__________________________________________
__________________________________________
__________________________________________

Remarks:
__________________________________________
__________________________________________
__________________________________________