Personal finance Chapter 5

Open-end Credit

A line of credit in which loans are made on a continuous basis and the borrower is billed periodically for at least partial payment

Interest

A periodic charge for the use of credit

Revolving check credit

A prearranged loan form a bank for a specified amount; also called a bank line of credit

Collateral

A valuable asset that is pledged to ensure loan payments

Fair Credit Billing Act (FCBA)

Sets procedures for promptly correcting billing mistakes, refusing to make credit card payments on defective goods, and promptly crediting payments

Mobile commerce

The ability to purchase using a mobile device

Capital

The borrower's assets or net worth

Character

The borrower's attitude toward his or her credit obligation

Capacity

The borrower's financial ability to meet credit obligations

Line of credit

The dollar amount, which may or may not be borrowed, that a lender makes available to a borrower

Conditions

The general economic conditions that can affect a borrower's ability to repay a loan

Annual percentage rate (APR)

The percentage cost (or relative cost) of credit on a yearly basis. This yields a true rate of interest for comparisons with other sources of credit

Finance charge

The total dollar amount paid to use credit

Consumer Credit

The use of credit for personal needs (except a home mortgage)

Credit

An arrangement to receive cash, goods, or services now and pay for them in the future

Simple Interest

Interest computed on principal only and without compounding

Closed-end Credit

One-time loans that the borrower pays back in a specified period of time and in payments of equal amounts