o level commerce topic 3: consumer credit revision notes
TRANSCRIPT
O level CommerceTopic 3:
Consumer creditREVISION NOTESwww.fetsystem.com
Use of creditUse of credit
In credit the buyer buys and uses the In credit the buyer buys and uses the product but pays later for the product but pays later for the product or serviceproduct or service
Increased use of creditIncreased use of credit
The use of credit has increasedThe use of credit has increased All businesses are ready to sell their All businesses are ready to sell their
products or services on creditproducts or services on credit The sales have increased due to creditThe sales have increased due to credit The bad debts have also increasedThe bad debts have also increased Bad debt is the money which is not Bad debt is the money which is not
recovered due to non-payment of recovered due to non-payment of buyer in case of credit salebuyer in case of credit sale
Advantages of credit to the Advantages of credit to the buyerbuyer
Can buy goods which are not Can buy goods which are not affordableaffordable
Increased standard of livingIncreased standard of living Payment can be made in installmentsPayment can be made in installments Convenient ( it is easy to use and Convenient ( it is easy to use and
carry credit card)carry credit card)
Disadvantages of credit to the Disadvantages of credit to the buyerbuyer
The seller will charge interest on The seller will charge interest on creditcredit
Problem in making the paymentProblem in making the payment Social problemsSocial problems Fake Fake
Advantages of credit to the Advantages of credit to the sellerseller
Increased salesIncreased sales Gain customer loyaltyGain customer loyalty Out of date stock is usually sold on Out of date stock is usually sold on
credit to get rid of itcredit to get rid of it Seller charges interest and offers no Seller charges interest and offers no
discount on goods sold on creditdiscount on goods sold on credit
Disadvantages of credit to the Disadvantages of credit to the sellerseller
Money is sometimes not recovered Money is sometimes not recovered from the buyer (bad debts)from the buyer (bad debts)
Late paymentLate payment Cash flow problemCash flow problem
Types of creditTypes of credit
Hire purchaseHire purchase Extended creditExtended credit Store cardsStore cards Credit cardsCredit cards Informal credit Informal credit
Hire purchaseHire purchase
Ownership remains with seller until Ownership remains with seller until the last paymentthe last payment
Payment is made in installmentsPayment is made in installments Interest is chargedInterest is charged Examples of things bought on hire Examples of things bought on hire
purchase: cars, televisions purchase: cars, televisions
Advantages of hire Advantages of hire purchasepurchase
Disadvantages of hire Disadvantages of hire purchasepurchase
Extended creditExtended credit
Extended credit given to customerExtended credit given to customer Facility provided by the departmental Facility provided by the departmental
storesstores The buyer buys and uses the productThe buyer buys and uses the product The buyer can resell the product as The buyer can resell the product as
he/she is the owner of the producthe/she is the owner of the product
Advantages of extended Advantages of extended creditcredit
To sellerTo seller– Increased salesIncreased sales
To buyerTo buyer– Use the product but pay laterUse the product but pay later– Can resell the productCan resell the product
Disadvantages of extended Disadvantages of extended creditcredit
To sellerTo seller– Recovery of the money is a problemRecovery of the money is a problem
To buyerTo buyer– Buyer has to pay interestBuyer has to pay interest– Buyer cannot return the product if he Buyer cannot return the product if he
does deem it as fitdoes deem it as fit
Store cardsStore cards
Plastic cards issued by departmental Plastic cards issued by departmental stores to the customersstores to the customers
Credit limit is givenCredit limit is given The amount used on the card has to The amount used on the card has to
be paid off end of the monthbe paid off end of the month
Advantages of store cardsAdvantages of store cards
To buyerTo buyer– Interest free purchaseInterest free purchase– Extra servicesExtra services
To sellerTo seller– Increased salesIncreased sales– Customer loyaltyCustomer loyalty
Disadvantages of store Disadvantages of store cardscards
To buyerTo buyer– The customer tends to overspend as The customer tends to overspend as
he/she does not have to pay nowhe/she does not have to pay now To sellerTo seller
– Bad debtsBad debts
Credit cardsCredit cards
Plastic card owned by the credit card Plastic card owned by the credit card holder and issued by the banksholder and issued by the banks
Credit limit is givenCredit limit is given No interest charged if amount paid No interest charged if amount paid
end of the monthend of the month 3% of sales given to credit card 3% of sales given to credit card
compnay as commisioncompnay as commision Master card and VisaMaster card and Visa
Advantages of credit cardsAdvantages of credit cards
Convenient to useConvenient to use Easy obtain cashEasy obtain cash Increased standard of livingIncreased standard of living It is used all over the worldIt is used all over the world
Disadvantages of credit Disadvantages of credit cardcard
Cards holders normally overspendCards holders normally overspend Credit card fraudsCredit card frauds Disputes and social problems due to Disputes and social problems due to
payment issuespayment issues Use of credit cards in developing Use of credit cards in developing
countries is limitedcountries is limited
Informal creditInformal credit