Ch 16 Flashcards

1
Q

money borrowed to buy something now, with an agreement to pay later; have to be 18

A

credit

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2
Q

the history of credit in the early years:

A

general store (dollar store, CVS)

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3
Q

history of credit 1990

A

increased understanding of credit

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4
Q

credit today=

A

1990’s record # of brankruptcy’s

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5
Q

person borrowing money

A

borrower or debtor

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6
Q

loaning the money

A

creditor

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7
Q

all your assets added (what you own)—-what you owe (liabilities)

A

capital

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8
Q

money/net worth you have after debts

A

capital

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9
Q

pledging to repay the loan

A

collateral

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10
Q

on credit, it’s the $$ you borrow

A

principal

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11
Q

anything you have to pay back over and above the principal

A

finance charge

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12
Q

you pay these in incriments (pay $400/month for 36 monts)
ex. mortgage, car payment
AKA close-ended

A

installment agreement

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13
Q

whatever you take the loan out for, is used as collateral

A

secured loan

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14
Q

ex. of non-secured loan =

A

student loan

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15
Q

List the advantages of consumer credit

A
  • purchasing power
  • emergency funds
  • convenience
  • deferred billing
  • safety
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16
Q

List the disasdvantages of consumer credit

A
  • higher prices
  • finance charges
  • tie up income
  • overspending
17
Q

QUALIFICATION for credit is based on 3 things:

A

income
financial position
collateral

18
Q

the value of property you possess (such as bank accounts, investments) after deductig your debts

19
Q

represents cash outflow and will be compared to your cas inflow (income)

20
Q

open 30 day accounts, can always use a credit card

A

open-ended credit

21
Q

ex. installment agreement

A

closed-end credit

22
Q

service now, pay later

ex. cell phone, cable

A

service credit

23
Q

What are some sources of credit?

A
  • retail stores
  • credit card companies
  • banks and credit unions
  • finance companies
  • pawnbrokers
  • private lenders (mom, dad, friends)
24
Q

the free period which allows you to avoid a finance charge if you pay in full before the due date

A

grace period

25
pre-established amount that can be borrowed on demand
line of credit
26
money borrowed against the credit card limit
cash advance
27
unlicensed leaders who charge illegal interest rates
loan sharks
28
a service to customers that allows you to charge now and not be billed for several months
deferred billing
29
in some states, maxium interest rates are set by _____ laws
usury
30
a legal business where loans are made based on the value of mercandise used as collateral
pawnbroker
31
something of value that can be sold to pay a debt is often referred to as _______
collateral
32
finance companies charge higer rates of interest on loans because ______
they take more risk