Unit 7 Vocab - Credit and Credit Cards

APR

(Annual Percentage Rate) The interest or percentage extra that you pay when you borrow money. The cost of borrowing money.

Credit Report

3 reports that you get annually from www.annualcreditreport.com, looks at your credit history, level of debt, outstanding payments (late/overdue) and court judgments

Credit Card Companies

A company that issues credit cards such as VISA, Mastercard, Discover, American Express

Credit Score

A number from 300-850 that rates your trustworthiness when it comes to borrowing and repaying money.

Credit Cards

A plastic card that you use to buy things now with money that you have borrowed (charged), and pay the money back later. You have to pay interest (extra money) plus the principal (original amount of money you borrowed)

Pawn Shop

A shop that you can give something valuable to(collateral) before they give you a loan. If you pay them back they will give you your stuff back, but if you do not pay them back they will sell your stuff to someone else.

Payday Loan

A short term loan that you can get until payday, these loans have high interest rates and finance charges. Not really a good deal for you.

Cash Advance

A short term loan where they give you cash up front (in advance), these loans have high interest rates and finance charges.

Promotional Rate

An interest rate that is limited in time, such as 6 months, that serves as an enticement for someone to open a credit card/take out a loan. Sometimes called Introductory rate.

Credit

Debt, owe, loan, lend, borrow, when you take or use money now and pay it back later

Credit Reporting Agency

Experian, EquiFax and TransUnion are the 3 main credit reporting agencies. You receive 1 free report from each annually.

Collateral

Something that can be taken away if you do not pay your bill/ loan

Due Date

The day a bill is due

Minimum Payment

The lowest payment you can pay on a loan or credit card for the month without being penalized. Although, if you only make the minimum payment you will end up owing more money than if you pay off a larger amount.

Balance Owed

The total amount you owe on a loan or credit card. Not just the amount due at the end of a month.

Consumer credit counseling services

This is a service that can counsel you (give advice) how to get out of debt/ repay your loans

Debtors Anonymous

This is a support group for people who are addicted to spending money and want help.

Late Fee

This is an extra amount you pay if you pay a bill late (also hurts your credit score)

Variable Interest Rate

This is an interest rate that can change while you have a loan, changing what you pay each month. Home loans (Mortgages) and Credit Cards could be like this.

Fixed Interest Rate

This is an interest rate that will stay the same the whole time you have the loan, such as a car loan

Grace Period

This is extra time given to you after a payment is due (due date) but before a late fee or penalty is imposed.

Credit Limit

This is the highest amount you can borrow or put/ charge on a credit card. Could be different amounts for different people depending on their credit score.

Line of Credit

This is the highest amount you can borrow or put/ charge on a credit card. Same as Credit Limit.

Predatory Lending

This is when people lend you money but charge really high interest rates and fees that aren't fair. This is when lenders try to take advantage of borrowers. Ex loaning someone $200 and expecting $600 to be paid back next week.

Revolving Credit

This type of credit is a cycle of buying, then paying later, such as a credit card

Unsecured Loan

This type of loan does not have collateral but instead usually charges more money (fees and interest) if you don't pay such as credit cards, payday loans and cash advances. Sometimes called an Uncollateralized Loan.

Secure Loan

This type of loan has collateral (something that can be taken away if you do not pay) such as a mortgage, a car loan or a loan from a pawn shop. Sometimes called Collateralized Loan.

Cosigned Loans

When 2 people sign for a loan together, meaning they are both responsible to pay for it. Often a parent or relative is the cosigner.

Garnishment

When money is taken out of your paycheck by the government to pay a debt you owe.

Repossession

When you cannot make the payments on something (car, phone, furniture) and the person who sold it to you takes it back.

Bankruptcy

When you cannot pay your debts and the government forgives some of it for you. Stays on your credit report for 10 years, drastically lowers your credit score.

Default

When you don't pay back your loans. May result in repossession of property/ bad credit score.

Identity Theft

When your personal information is stolen and someone pays for things in your name or steals money from you.

Capacity

Your ability to repay a loan, whether you earn enough money, and how much other debt you have.

Character

Your reputation of timely repayment on loans/ credit cards/ bills