In this week's readings, I learned more about credit. Credit is a way for people to use money they may or may not have to purchase to items and pay the money back at a later date. Credits are often used for luxury purchases or long-term investments such as school tuition. A common pitfall people face when it comes it credit is debt. People who used multiple credit cards for luxury purchases had a greater credit card debt than people who used their credit to finance higher education because higher education can lead to a higher paying job that will help pay off that debt later in life. Another common pitfall is when a person takes out a loan and is unable to repay it. Loans come with a timeline to repay, interests rates, and fees/penalties that must be looked at closely. Property such as cars, houses, or boats may be used as collateral to count towards the payment of the loan. Lenders who collect loan payments have also been known to get their money back by taking portions of a person's Social Security payments. Consumers should be aware of their rights when it comes to credit. Some consumer rights I learned about include;

• the right to a copy of your credit report

• you have the right to know who has received your credit report in the last year for most purposes and for employment purposes

• you cannot be denied credit based on your race, ethnicity, gender, religion, age, or marital status

• if you are denied credit, you have the legal right to know why

• you may request explanation/documentation for charges or electronic fund transfers you do not recognize

• you have the right to procedures established to fix mistakes such as charges or electronic fund transfers made by unauthorized persons and charges or electronic fund transfers that display the wrong transaction date or amount

I also learned about bankruptcy, which is a legal recourse and last resort for people in debt who cannot repay what they owe to creditors to receive relief from some or all of their debt. The debtors assets would be liquidated by the federal courts to pay off a portion of their debt and receive protection from creditors. In cases where a person who files for bankruptcy maintains a regular income, they may set up payments from that income and be allowed to keep their assets. Bankruptcy can be avoided by spending wisely and paying off credit balances before you are in debt. Sometimes due to health issues, injuries, and sudden loss of wages bankruptcy may be unavoidable. I learned about debt-free-living which is a way of living that involves a strict monthly budget to maintain and grow your finances and ultimately remain free of debt or easily pay off your debt. Some of the pros to debt-free-living are saving money in the long run, staying free of debt, and building up an emergency fund for possible future struggles. Some of the cons to debt-free-living are sacrificing to stay within your budget such as saying no to dinner with friends, saying no to your wants/unnecessary items such as new shoes or a manicure, and building your credit can be difficult if you are only putting money towards buying necessary items and saving. Debt-free-living can be difficult in the beginning, but I think being debt free and building up your savings is worth it in the end. 

References:

Goldsmith, E. B. (2016). Consumer economics : Issues and behaviors. ProQuest Ebook Central

          https://ebookcentral.proquest.com

Renzulli, K. (2020, June 23). What a Debt-Free Lifestyle Really Looks Like. Retrieved January 27, 2021, from

          https://www.magnifymoney.com/blog/pay-down-my-debt/the-benefits-of-living-debt-free791136744/

​​