Credit Unit

What is balance?

Amount owed on a credit card.

What are the 5 C's?

Character, Capital, Capacity, Conditions, and Collateral

What is and Annual Percentage Rate?

The rate that is charged for borrowing.

Pros of Credit?

you can buy items now. you don't have to carry cash. you have a record of your purchases. convenience. your bills are combined into one payment.

Cons of Credit?

you pay more for items (interest payments). your credit cards may be lost or stolen. possible added fees. you may do more impulse buying. it's easy to lose track of how much you spend. possible financial problems.

What is Revolving Credit?

A line of credit where the customer pays a commitment fee and is then allowed to use the funds when they are needed.

What is Capital?

Capital refers to your net worth — the value of your assets minus your liabilities. In simple terms, how much you own (for example, car, real estate, cash, and investments) minus how much you owe

What is Collateral?

Collateral refers to any asset of a borrower (for example, a home) that a lender has a right to take ownership of and use to pay the debt if the borrower is unable to make the loan payments as agreed.

What is Capacity?

Considering your other debts and expenses when determining your ability to repay the loan. Creditors evaluate your debt-to-income ratio

What is Conditions?

Lenders consider a number of outside circumstances that may affect the borrower's financial situation and ability to repay, for example what's happening in the local economy

What is cash back/rewards?

Receive a cash refund/gift after making a purchase.

What is a credit line?

The maximum amount of credit that a customer of a store, bank, etc., is authorized to use

What is minimum payment?

The smallest amount a borrower can pay on a bill, to remain in good standing with their company.

What is Installment Credit?

This is credit that you use to borrow money and promise to repay in equal amounts over a specific period of time.

What is Single Payment Credit?

This type of credit requires that all money borrowed must be repaid in full every month. Pay it all off in one payment.

What is an Annual Fee?

Yearly fee that you pay for the ability to use the credit card.

What is Character?

Your stability