Personal Finance: Chapter 4

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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


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