Ch 25

Question 1

What is credit

Answer 1

Privilege of using someone else’s money for a period of time

Question 2

Debtor

Answer 2

Anyone who buys on credit or receives a loan

Question 3

Creditor

Answer 3

The one who sells on credit or makes a loan

Question 4

Consumer credit

Answer 4

Money borrowed for personal reasons

Question 5

Commercial credit

Answer 5

Money borrowed by manufacturers

Question 6

Benefits of credit

Answer 6

Convenience
Immediate possession
Extra savings 
Build up credit rating
Useful in emergency

Question 7

Precautions of credit

Answer 7

Overbuying
Careless buying
Higher prices due to interest
Overuse

Question 8

Credit rating

Answer 8

A measure of your ability and willingness to pay debts in time

Question 9

Interest

Answer 9

Cost of borrowing money

Question 10

Charge accounts

Answer 10

Short or medium term credit

Often offered by stores

Question 11

Regular charge accounts

Answer 11

Required to pay bill in full every 25-30 days

Question 12

Revolving credit account

Answer 12

Allows you to borrow up to a set amount and pay back some or all of it each month

Question 13

Budget charge accounts

Answer 13

Installment credit

Pay in equal payments each month

Question 14

Credit card companies earn money by

Answer 14

Interest and fees

Charge stores 1-2% of the purchase price for letting you use credit

Question 15

Single purpose credit cards

Answer 15

Buy goods and services only from the issuing store

Question 16

Multipurpose credit cards

Answer 16

Used almost anywhere

Question 17

Travel entertainment cards

Answer 17

Regular charge account

Annual fees are higher

Question 18

Single payment loan

Answer 18

Debt pays back the loan all at once at end of loan period

Farmers

Question 19

Installment loan

Answer 19

Regular even payments

Principal+ interest

Question 20

Mortgage loan

Answer 20

Installment loan for a home

15-30 yr loan

Question 21

Payroll advance services examples

Answer 21

Pawnshop

Payroll advance