Personal Finance: Chapter 4
3 credit reporting agencies
1. Experian 2. TransUnion 3. Equifax
5 advantages of credit
1. buy clothes now and enjoy them 2. establish a credit card 3. obtain cash advantages when broke 4. have funds available for emergencies 5. enjoy a sense of having money to spend
the 3 C's of credit
1. collateral 2. character 3. capacity
5 disadvantages of credit
1. paying large interest charges and fees 2. being tempted to spend too much 3. suffering the stress of making payments 4. using one card to pay off another card 5. paying off cards can become a huge financial burden
debit card
a card used for purchases that is used by the consumer's bank; funds are deducted from the consumer's account
annual fee
a charge by some credit card companies for use of the card and services
over the limit fee
a fee that is added to a credit account when the amount owed exceed the limit on the account
credit rating (fico score)
a formal evaluation of an individuals or business' credit history and capability of repaying obligation by a credit report agency
secured loan
a loan which is backed by the borrower's assets, when the borrower's credit rating is not strong enough to justify an unsecured loan
deprecation
a loss or decrease in value, especially because of wear or age
credit card
a plastic card with a magnetic strip on one side that can be used to purchase goods and services
annual percentage rate (APR)
a rate that shows the total cost of credit annually; it includes a percentage of the principle as interest on a loan plus other coasts
revolving credit
a system of retail credit in which buyers make periodic payments on purchases and services
collateral
an asset such as an automobile or a peice of property that a person uses when taking out a loan, promising to give the asset to the lender if loan payments can not be met
reloadable card
an electronic, stored value card that permits a user to increase the value of the card
capital
the amount of monetary resources a potential buyer and/or loan applicant has available
credit
the borrowing capacity of an individual or company; buying now and paying later
finance charge
the cost of credit, including interest paid by a costumer or a consumer for a consumer loan
principle
the original sum borrowed
interest
the time allowed for payment charged of a debt or loan without a penalty
grace period
the time allowed for payment of a debt or loan without a penalty
unsecured loan
based on ability to pay (revolving credit- Visa, MasterCard)
consumer debt
debt that has been incurred primarily for the purchase of consumer goods
disclosure statement (shumer box)
for credit cards, the reporting of the exact terms and conditions under which credit will be extended prior to an applicant signing up for the card
predatory lending
fraudulent, unethical, discriminatory or abusive lending practices designed to exploit vulnerable borrowers and lead to their increase indebtedness
minimum payment
on a credit card account of loan, a fixes percentage of the balance due which must be payed each month
due date
on a credit card account, the date by which the minimum payment must be recieved every month, without incurring a late fee or other penalty
