Ch 5 - Credit
disadvantage of retail credit cards
they carry higher interest rates than traditional CC's
Generally, in closed-end credit, the seller owns the ___________ until all debts are paid.
title
all of the following are some additional options to avoid ID theft, except
use as few online sources as possible
It is easier to regain credit if you file which type of bankruptcy?
wage earner's plan
a debtor with regular income proposes a plan for using future earnings or assets to eliminate his/her debts over a period of time
wage earner's plan
If debtor is unable to pay fees for filing bankruptcy, the courts may do what?
waive the fee
Why are the 5 C's used?
policies that help determine who will receive credit
How do you calculate debt to equity ratio?
divide liability by net worth
debt-to-equity ratio is calculated by
dividing your total liabilities by your net worth
Declared bankruptcy should always be a last resort, and people should be required to pay back at least a portion of their debt if they are able to.
Bankruptcy Abuse Prevention and Consumer Protection Act
Examples of open-ended credit
CC from retail stores travel and entertainment overdraft protection
provide debt counseling
CCCS universities credit unions military bases state and federal housing authorities
Who handles complaints regarding credit card companies?
CFPB
_________________ loans are the easiest to obtain
expensive
The Electronic Fund Transfer Act that states you may sue for actual damage plus punitive damages of not less than $_____ or more than $__________. You are also entitled to court costs and attorney fees.
$100 $1,000
The courts must charge a fee of $_______ to file for bankruptcy.
$350
Your max liability for a stolen CC is $_______, if you report it lost or stolen.
$50
CC companies sometimes provide accidental death and dismemberment insurance when you travel on a common carrier, up to how much money?
$50,000
CC companies sometimes provide auto rental collision damage wavers for damage due to collision or theft, for how much money?
$50,000 or more
Smart cards can combine what types of things?
- CC balances - driver license - health care ID - medical history - airline ticket (track flyer miles)
what types of assets have rights against bankruptcy filings
- Social security payments - unemployment comp. - net value of your home, vehicles, appliances, tools used in work - books
advantages of retail credit cards
- easier to get
Also excluded from bankruptcy relief are debts from what criminal acts?
- fraud - DUI - certain acts or crimes
What info must a debtor provide when filing a petition for bankruptcy (4)
- list of all creditors & amts - income and source - list of all property - list of monthly expenses
What happens in a straight bankruptcy
- many debts forgiven - most assets sold
Ways to protect credit info online
- secure browser - keep record of transactions - review monthly statements - read privacy and security - keep personal info private - never give password online - don't download files from strangers
6 Rules for using your Retail Credit Card
- watch holiday spending - pay bill on time - zero vs deferred interest - limit # of cards apply for - act fast if you cant pay
The release from debt does not affect what?
-alimony -child support -certain taxes -fines -certain education loans -debts you fail to disclose in bankruptcy court
To protect your card, you should take the following actions (3)
1. be sure it is returned after each purchase 2. keep a record of your CC # 3. notify the CC company immediately if stolen
If you think your ID has been stolen, the Federal Trade Commission recommends that you take the following actions (3)
1. contact credit bureau 2. contact creditors 3. file a police report
What should you do if your ID is stolen?
1. contact fraud dept 2. contact creditors 3. file police report
If you think your bill is wrong, or want more info about it, follow these steps: (2)
1. notify creditor in writing 2. pay the portion that is not in question
Expensive loans can charge rates as high as ______ % to ________ %.
12-25
Cash advance fees usually range from _____% to ______%.
2-3
With single lump-sum credit, you usually must repay the loan within how many days?
30-90
The use of credit can provide up to a _____ day float, which includes a grace period of ________ days.
50 20-25
A creditor must adjust your account or tell you why your bill is what it is within how many days?
90
what occupation Began using credit first?
farmers
Bankruptcies decreased after this bill was passed. However, poor economic conditions between 2006-2010 caused the number to increase again.
Bankruptcy Abuse Prevention and Consumer Protection Act
A type of credit where you pay back one-time loans in a specified period of time and in payments of equal amounts.
Closed-end credit
Failure to repay a loan may result in loss of income, property, and your good reputation. This is called __________________.
Collateral (security)
a nonprofit organization affiliated with the National Foundation for Consumer Credit
Consumer Credit Counseling Act (CCCS)
This act states that the maximum amount you must pay if someone uses your card illegally is $50.
Consumer Credit Protection Act
created a one-stop complaint website for credit card issues
Consumer Financial Protection Bureau
Act that states CC companies must provide 45 days notice of rate increases.
Credit Card Accountability Responsibility and Disclosure Act of 2009
If you think you can prove that a creditor has discriminated against you for any reason prohibited by this act, you may sue for actual damage plus punitive damage.
Equal Credit Opportunity Act
starts all credit applicants off on the same footing. It states that race, color, age, sex, marital status, and other factors may not be used to discriminate against you in any part of a credit dealing.
Equal Credit Opportunity Act (ECOA)
A creditor that fails to follow the rules that apply to correcting any billing errors will automatically give up the amount owed on the item in question and any finance charges on it, up to a combined total of $50. This is true even if the bill is correct.
Fair Credit Billing Act
set procedures for promptly correcting billing mistakes, refusing to make credit card or revolving credit payments on defective goods, and promptly crediting your payments.
Fair Credit Billing Act
Act that requires that solicitations for credit cards in the mail, over the phone, in print, or online must provide the necessary terms of the account
Fair Credit and Charge Card Disclosure Act
A type of credit where loans are made on a continuous basis and you are billed periodically for at least partial payment.
Open-ended credit
illustrates the rate of personal bankruptcy in the U.S.
The US Bankruptcy Act of 1978
Act that insures that if a creditor fails to disclose info as required, or gives inaccurate info, you can sue for any monetary loss you suffer.
Truth in Lending and Consumer Leasing Act
card holders who do not pay off their balance every month
borrowers
These types of cards must be paid in full within 30 days.
Travel and entertainment
A person who files for bankruptcy is called...
a debtor
If you have bad credit history and have trouble getting a credit card, look for what?
a savings institution that will give you a secured credit card
digital gift cards are sent via e-mail and usually include an ________ _______ to activate and use online to make purchases.
access code
a loan that is billed to your credit card
cash advance
______________-end credit is more common and has a _____________ interest rate charged by lenders.
closed lower
refers to the use of credit for personal needs (except home mortgage), by individuals and families, in contrast to credit used for business purposes
consumer credit
places the burden of proof for accurate credit info on the credit bureau, rather than you
consumer credit reporting reform act
card holders that pay off their balances in full each month
convenience users
an arrangement to receive cash, goods, or other services now and pay for them in the future
credit
Some CC cards offer no _________________ transaction fees, such as Capital One.
foreign
Which is mentioned as the top ID theft issue?
government documents
a loan based on your home equity
home equity loan
a direct loan of money for personal purposes, home improvements or vacation expenses.
installment cash credit
In which type of closed end credit do you make a down payment?
installment sales credit
a loan that allows you to receive merchandise, usually high-priced items, such as large appliances or furniture.
installment sales credit
The 3 most common types of closed-end credit
installment sales credit installment cash credit single-lump sum credit
a periodic charge for the use of credit, or other finance charges
interest
the max dollar amount of credit the lender has made available to you
line of credit
the ability to purchase using a mobile device
mobile commerce
Examples of closed-end credit
mortgage loans auto loans installment loans
Which type of credit is often more difficult to obtain because the lender must rely on your word?
open-ended credit
The quickest way to reduce your debt to equity ratio is to
pay off some of your debt
a prearranged loan for a specified amount that you can use by writing a special check.
revolving check credit
CC companies sometimes provide ________________ ______________ referral service for emergency roadside assistance, such as towing, locksmiths, and more.
roadside dispatch
prevents new creditors from accessing your credit file and others from opening accounts in your name until it is lifted
security freeze
a loan that must be repaid in total on a specific day
single lump-sum credit
a plastic card equipped with a computer chip that can store 500x as much data as a normal CC.
smart card
in a _____________ bankruptcy, many but not all debts are recovered.
straight
Unlike interest on most other types of credit, the interest you pay on a home equity loan is ___________________.
tax-deductible
Under the Consumer Credit Reporting Reform Act, the creditor must prove what?
that disputed info is accurate.
Perhaps the greatest disadvantage of using credit is
the temptation to overspend, especially during periods of inflation.
Experts suggest that you spend no more than _______% of your net income on consumer credit payments.
20%
If you have a particular problem with a bank in connection with any of the consumer credit protection laws, you can get advice and help from where?
The Federal Reserve System
Revolving check credit is also called
bank of line credit
Sources of consumer credit include what financial institutions.
banks and credit unions
In the Fair Credit Reporting Act, you may sue if the creditor violates the rules regarding access to your credit records. You are entitled to __________ plus _________ ___________ the court allows if the violation is proven to have been intentional
damage and punitive damage
debt payment - to - income ratio is calculated by
deciding your monthly debt payment by your net monthly income
the total dollar amount you pay to use credit
finance charge