15 Credit Products Flashcards
What is an acceleration clause?
Part of a credit contract stating that after a specific number of payments are unpaid, the loan is considered in default, and all remaining installments are due and payable upon demand of the creditor.
Define add-on interest.
Interest calculated by applying an interest rate to the amount borrowed times the number of years, to arrive at the total interest to be charged.
What is amortization?
Loan repayment method in which part of the payment goes to pay interest and part goes to repay principal.
What are annual fees?
Charges levied against cardholders for the privilege of having an open account, but that are not included in the advertised APR.
What is a balance transfer?
Full or partial payment on the balance of one credit card using a cash advance from another.
Define bank credit card.
Open-ended credit account with a financial institution that allows the holder to make purchases almost anywhere.
What are cash advance (or convenience) checks?
A check-equivalent way to take a cash advance on a credit card.
What is a credit limit?
Maximum outstanding debt that a lender will allow on an open-ended credit account.
What is included in a credit statement?
Monthly bill on a credit card account showing the charges and payments made, minimum payment required, and due date, among other information.
Define default in credit terms.
Occurs when a borrower fails to make a payment when due or fails to meet other requirements of the credit agreement.
What is installment (or closed-end) credit?
Credit arrangement in which the borrower must repay the amount owed plus interest in a specific number of equal payments.
What is a minimum payment?
Payment that must be made to a credit account each month to cover interest and a portion of the amount owed.
Define open-ended (or revolving) credit.
An arrangement in which credit is extended in advance of any transaction so that borrowers do not need to apply each time they need to use credit.
What is a periodic interest rate?
The monthly rate applied to the outstanding balance of a loan.
What is a prepayment penalty?
Special charge assessed to the borrower for paying off a loan early.
What are retail credit cards?
Allow customers to make purchases on credit at any of the outlets of a particular retailer.
Define simple interest (or declining balance) method.
Interest calculation method in which interest is assessed during each billing period based on the outstanding balance of the installment loan for that billing period.
What is a transaction fee?
A small charge levied each time certain types of transactions occur, such as for cash advances and balance transfers.
True or False: Variable interest rates change monthly or annually according to general interest rate changes.
True
