Finance 331-Chapter 6

How can periodically computing ones debt safety ration be useful?

-it can influence decisions whether to return to school, if a loan will be needed to pay for it. -It can serve as an early warning system of approaching financial trouble, providing time to take preventive measures -It can influence decisions about looking for higher or lower paying jobs.

You should avoid using your credit card to:

Meet basic living expenses make impulse purchases, especially expensive ones purchase nondurable (short-lived) goods and services

Debit Card

Purchases made with this plastic card cause funds to be immediately transferred from the account holders bank account to the seller as if the account holder was paying with cash.

Secured Card

This credit card is useful for people with no credit or bad credit histories, and requires the card holder to invest in a certificate of deposit that can be used as collateral for the card

Credit Counselor

This is a professional financial advisor who assists consumers in danger of bankruptcy in formulating a budget that facilitates the repayment of debts and setting reasonable spending limits.

Convenience Check

This is one means by which to obtain a cash advance from the bank that offers a credit card

Credit Scoring

This is the process of evaluating the credit worthiness of a credit applicant via the assessment of an applicants credit report and the calculation of a credit score. A method of evaluating an applicants creditworthiness by assigning values to such factors as income, existing debts and credit references.

FICO Score

This number, which was developed by Fair Isaac & Co. , provide an indication of a borrowers credit risk and is based on among other factors, the borrowers previous use of credit and payment history, the length of his or her credit history and types of credit use.

Debt Safety Ratio Formula

Total monthly consumer credit payments / monthly take-home pay

Credit Card Act of 2009

Under this piece of Federal legislation, credit card statements must be sent our 21 days before the due date.

Debt Safety Ratio

a computation that defines ones monthly loan repayment burden. It compares loan obligations to income

For protection against getting into credit card trouble, except for occasional use for convenience, credit card purchases:

should outlive the payments. ( the time it takes to pay it off)

Home equity credit line

this form of open credit is secured, by the existing equity in a home

Teaser rate

this is the name given to interest rates offered by banks to new credit cardholders, which are only effective for the first 6 to 12 months of the cardholders account

Reward Card

this type of credit card carries a higher interest rate than regular bank cards and offers incentives such as rebates-including airline tickets, cash, or credits that can be used to purchase the sponsors merchandise.