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Personal Finance > chapter 16&17 > Flashcards

chapter 16&17 Flashcards

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1
Q

what is credit ?

A

money borrowed to buy something now, with an agreement to pay later

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2
Q

how old do you need to be to have credit -

A

18

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3
Q

the history of credit …. in the early years:

A

general stores: ex. dollar store

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4
Q

the history of credit in 1900…..

A

increased understanding of credit

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5
Q

credit today —

A

1990’s record #of bankruptcy’s

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6
Q

the borrower or debtor -

A

person borrowing the$

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7
Q

creditor -

A

loaning the money

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8
Q

capital -

A

money/ net worth you have after debts

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9
Q

collateral-

A

pledging to repay the loan

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10
Q

principal -

A

on credit, $ you borrow

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11
Q

financial charge -

A

anything you have to pay back over & above the principal

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12
Q

all secured loans
- ex. mortgage, car payment
-you pay these in incriments
AKA CLOSE END

A

installment agreement

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13
Q

If you dont pay your minimum payment by the due date, you will receive a ……..

A

Late fee

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14
Q

When you’re borrowing $ for something, they serve as collaterals -

A

Secured loan

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15
Q

Advantages of consumer credit -

A 
Purchasing power
Emergency funds
Convenience
Deferred billing
Safety
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16
Q

Disadvantages of consumer credit

A

Higher prices
Financial charges
Tie up income
Overspending

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17
Q

To qualify for credit, you must have th ability to …..

A

Repay the loan

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18
Q

Qualification is based on 3 things -

A

Income
Financial position
Collateral

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19
Q

Its the value of property you possess after deducting your debts

A

Capital

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20
Q

Having capital tells the creditor that you have accumulated ……… which indicates responsibility

A

Assets

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21
Q

Your …… represents cash outflow and will be compared to your cash inflow income

A

Debt

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22
Q

Types of credit -

A

Open-ended
Close-needed
Service

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23
Q

Its a credit card

  • open 30-day accounts
  • revolving credit accounts
A

Open - ended credit

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24
Q

Any installment plans are this type of credit

Ex. Car payments

A

Closed-ended

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25
Q

The credit that you have now, but pay for it later

A

Service credit

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26
Q

Its the rate you would pay if you carry a balance

A

Annual percentage rate

APR

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27
Q

The time you can still pay w/o being charged w/ a penalty -

A

Grace period

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28
Q

What you have to pay in order to get a card-

A

Annual fees

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29
Q

Method of calculating the finance charge:

Most do an average ……….

A

Daily balance

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30
Q

Sources of credit -

A 
Retail stores
Credit card companies
Banks/credit unions
Finance companies
Pawnbrokers 
Private lenders
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31
Q

Ex of retail stores -

A

Dillard’s

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32
Q

Someone who works at a pawn shop-

A

Pawnbroker

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33
Q

Borrowing what you dont own -

A

Private lenders

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34
Q

Organizations that makes loans besides banks -

A

Finance companies

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35
Q

Is there a charge to use the coinstar center machine -

A

Yes but not always

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36
Q

Do i need to sort my coins before using the coinstar machine?

A

No, it does it for you

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37
Q

Do i have to redeem the cash voucher at the store where I cash in my coins -

A

You should do it that day

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38
Q

Does the coinstar cash voucher need to be redeemed for cash right away?

A

No, but you should

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39
Q

The free period, also called ……, allows you to avoid a finance charge if you pay in full before the due date -

A

Grace period

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40
Q

One who lends money or the use of goods and services for payment at a later date is known as -

A

Creditor

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41
Q

Paying at a future date for the present use of goods and services or money is called

A

Credit

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42
Q

Is a pre-established amount that can be borrowed on demand -

A

Line of credit

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43
Q

A loan on which the goods purchased with the loan serve as _____ is a type of secured loan

A

Collateral

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44
Q

Is credit whereby you can add purchases up to a set credit limit

A

Open-ended

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45
Q

A loan for a specific amount that must be repaid in full, including finance charges, by a stated due date, is called …

A

Closed-ended credit

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46
Q

Is money borrowed against the credit card limit

A

Cash advanced

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47
Q

A manufacturer-related company, called ……, makes loans through authorized representatives

A

Sales finance company

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48
Q

Are unlicensed lenders who charge illegal interest rates

A

Loan sharks

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49
Q

Service to customers that allows you to charge now and not be billed for serveral months

A

Deferred building

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50
Q

The interest rate you pay for tthe use of credit is called

A

Financial charge

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51
Q

Almost everyone uses this credit

Involves having work performed and paying for it later

A

Service

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52
Q

They offer goods and services directly to consumers and include department stores, drug stores, clothing stores

A

Retail

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53
Q

Small loan companies

Charge higher interest rates and take more risk

A

Finance companies

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54
Q

In some states, maximum interest rates are set by …… laws

A

Usury

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55
Q

Is a legal business where loans are made based on the value of merchandise used as collateral -

A

Pawnbroker

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56
Q

Something of value that can be sold to pay a debt is often reffered to as -

A

Collateral

57
Q

T or F

Most disadvantages of credit can be eliminated by wise use of credit -

A

True

58
Q

T or F

Department stores, drug stores, and finance companies are all examples of retail outlets -

A

False

59
Q

T or F

Interest rates on loans are usually higher at credit unions than they are at banks

A

False

60
Q

T or F

Where no usury laws exist, financial institutions may charge whatever rate of interest is agreed upon

A

True

61
Q

T or F

In an installment purchase agreement, the item you are purchasing will serve as the collateral

A

True

62
Q

T or F

Affinity cards charge higher interest rates than regular bank credit cards -

A

False

63
Q

T or F

Credit has helped American economy to grow to a healthy place

A

True

64
Q

T or F

A line of credit is a preestablished amount you can borrow w/o the new loan application

A

True

65
Q

T or F

The Truth-in-lending law requires all lenders to calculate APR the same way

A

True

66
Q

T or F

A debtor is a person who borrows money from others

A

True

67
Q

Credit cards such as VISA abd MAstercard are examples of ….

A

Revolving credit agreements

68
Q

What is an examp of a service credit

A

Telephone bill

69
Q

Fianance companies charge higher rates of interest on loans because …

A

They take more risk

70
Q

Pawnbrokers sell merchandise you have pawned, called ……., if you do not repay the loan plus interest by a specificed date

A

Collateral

71
Q

What is not true about an installment purchase agreement -

A

New purchases can be added on

72
Q

GMAC Financial Services is an example of a -

A

Sales finance company

73
Q

Could a person survive in our enconomy w/o using credit at all ?

A

Yes

74
Q

Some ways ppl must use some form of credit -

A

Auto loans
Installment loans
Mortgage loans

75
Q

Credit reports has …..

A 
Current balance
Current payments
Your credit history
Marriage/divorce
Bankruptcy
76
Q

How information is gathered and used:

A

Subscribers

77
Q

People who pay a fee to credit bureau and share information

A

Subscribers

78
Q

Whats in your credit file -

A

Credit bureau
Credit report
Credit history

79
Q

Types of info stored in credit records

A

Any public info

80
Q

2 services available related to your credit file -

A

Credit guard services

Credit freezing services

81
Q

Where you pay someone to monitor your credit -

A

Credit guard services

82
Q

You can contact the bureau and freeze credit & so no one can touch it

A

Credit freezing services

83
Q

Five C’s of credit -

A 
Character
Capacity
Capital
Conditions
Collateral
84
Q

How you are financially -

A

Character

85
Q

Its your ability to pay back -

A

Capacity

86
Q

Are your assets more then your debt?

A

Capital

87
Q

Is your job secured?

A

Conditions

88
Q

Something to pledge for repayment -

A

Collateral

89
Q

Getting started with credit - (5)

A 
Begin w/ savings account
Open checking acct
Open store credit acct
Get small loan
Apply for credit card
90
Q

Credit ratings -

A

Excellent
Good
Fair poor

91
Q

They are well-established

A rating

A

Excellent credit rating

92
Q

What your goal should be

Never late, very reliable

A

Good credit rating

B rating

93
Q

Slow payers but do get money out of them

They are fair

A

Fair credit ratings

94
Q

Want to avoid!!

You have debts you dont pay

A

Poor credit ratting

95
Q

6 credit reports -

A 
Summary of info
Public record of info
Credit info
Acct detail 
Requests for credit history
Personal info
96
Q

5 credit laws -

A 
Consumer credit protection act
Fair credit reporting act
Fair credit billing act
Equal credit opportunity act
Fair debt collection practices act
97
Q

Its known as the Truth in Lending Act

-before buying car loan etc. , they have to tell you the full cost of credit before you sign

A

Consumer credit protection act

98
Q

Its where you have the right to see credit report once a year for free, unless youre denied credit -

A

Fair credit reporting act

99
Q

If theres an error, you have to contact them & they have to fix the error within a certain time -

A

Fair credit billing act

100
Q

You cannot be denied credit based on anything other than your credit worthiness ( to prevent discrimination ) is called

A

Equal credit opportunity act

101
Q

They can keep telling you to pay, but not aggressively or harassing.
They can take your home away, car, etc.

A

Fair debt collection practices act

102
Q

a responsible attitude toward paying bills and meeting obligations on time is called ….

A

character

103
Q

your ….. will answer questions about how you have paid your bills, how many bills you had and what type, ho much total credit you have been given and how much credit appears to be outstanding now -

A

credit history

104
Q
  • A credit bureau issues a written statement called …

- it itemizes accumulated info about a person through subscribers and public records -

A

credit report

105
Q

a member of the credit bureau is called …..

-pays fees for use of the bureau’s services in collecting information and issuing reports

A

subscriber

106
Q

……. scores are the credit scores many lenders use to determine credit risk

A

FICO

107
Q

is the ability to repay a loan or make payments on a debt out of current income -

A

capacity

108
Q

existing debts, stability of employment, and personal factors that determine a persons ability to meet financial obligations called ….

A

conditions

109
Q

is a business tht accumulates, stores, and distributes credit info to members -

A

credit bureau

110
Q

is a type of rating used by credit bureaus in determining a person’s general creditworthiness -

A

point system

111
Q

an ….. credit rating is earned when u pay ur bills before the due date

A

excellent

112
Q

a …. credit rating is earned when you pay your bills on the due datte or within a short grace period -

A

good

113
Q

a ….. credit rating is likely to result in denial of new credit -

A

poor

114
Q

a ….. credit rating is given to a person who pays during the grace period, but occasionally takes longer

A

fair

115
Q

is a person hired to collect the balance due -

A

debt collector

116
Q

the act of treating people differently based on prejudice rather than individual merit is called …

A

discrimination

117
Q

T or f

your credit history is an import record of your past experiences w/ credit, and you have rights and responsibilites for its accuracy

A

true

118
Q

T or f

a credit bureau is a nonprofit company established by members for the benefit of members -

A

false

119
Q

T or F

most large credit bureaus are computerized clearinghouses that search for and retrieve info to make reports -

A

true

120
Q

T or F

if you are denied credit based on a credit report, inaccurate info in your file may be the cause

A

true

121
Q

T or F

a debt collector is allowed to make telephone calls at anytime in order to collect overdue balances

A

false

122
Q

T or F

the consumer credit protection act prevents discrimination in the judgement of creditworthiness.

A

false

123
Q

T or F

A point system of credit rating is based on assigning value to such things as employment, amount of income, amount of current debt, or # of late payments

A

True

124
Q

T or F

An excellent credit rating results when you pay your bills on the due date every month and never miss a payment

A

False

125
Q

T or F

A person who is considered a good credit risk ususally meets five basic qualifications, called five C’s of credit

A

True

126
Q

It is lawful for creditors to ask you for person info, such as employment and residence history, in order to determine your creditworthiness -

A

True

127
Q

T or F

If you believe your bill contains an error, there usually is no hurry in resolving the problem -

A

False

128
Q

What is an unlawful purpose for a credit report -

A

Mailing list info

129
Q

The act that provides that you may see your credit file at no charge within 30 days of a credit denial is the …

A

Fair credit reporting act

130
Q

If you believe there is an error in your statement , your complaint must be in writing and mailed within ….. days after you receive it

A

60

131
Q

Your letter of complaint must be acknowledge in …..days

A

30

132
Q

Within ….. days of receiving your complaint, the creditors must either correct the error or explain why the bill is correct -

A

90

133
Q

The truth-in-lending act limits your liability when a credit card is lost or stolen to the first ….., unless the card is reported lost or stolen before it can be used -

A

$50

134
Q

Credit reports are issued by ….

A

Credit bureaus

135
Q

Credit files are updated ….. by computers and search procedures

A

Daily

136
Q

The act known for its provisions requiring full disclosure of all costs in a credit transaction is called ….

A

Truth-in-lending act

137
Q

To see ur credit file at anytime would cost you …

A

A small charge

138
Q

Debt collectors are required to …..

A

Give costumers the chance to clarify and dispute their bills

Personal Finance (8 decks)

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