Chapter 16 Vocab

Question 1

Use of someone else’s money, borrowed now with agreement to pay back later
Ties up family income

Answer 1

Credit

Question 2

A person who borrows money from others

Answer 2

Debtor

Question 3

Person or business that loans money to others

Answer 3

Creditor

Question 4

Represents cash flow
When your earnings exceed your expenses, you have the capacity to take on debt
You are solvent

Answer 4

Income

Question 5

Based on your capital and indicates responsibility

Net worth

Answer 5

Financial Position

Question 6

Value of property that you possess (bank accounts, investments, real estate) after deducting your debts

Answer 6

Capital

Question 7

Property pledged to assure repayment of a loan

Answer 7

Collateral

Question 8

Amount borrowed

Answer 8

Principal

Question 9

Total dollar amount of all interest fees you pay for the use of credit

Answer 9

Finance Charge

Question 10

Principal and interest for the time you have the loan

Answer 10

Balance due

Question 11

Least amount you pay under your credit agreement

Answer 11

Minimum Payment

Question 12

Increase interest rate on balance

Answer 12

Late fees

Question 13

Purchasing power
Emergency funds
Convenience
Deferred billing 
Proof of purchase 
Safety
Line of credit

Answer 13

Advantages of credit

Question 14

Higher cost
Finance charges 
Ties up income
Strains family budget
OVERSPENDING

Answer 14

Disadvantages of credit

Question 15

Where a borrower can use credit up to a states limit

Examples- charge cards (visa, MasterCard, etc)

Answer 15

Open-end Credit

Question 16

Can be used again and again up to a stated limit

Answer 16

Revolving Accounts

Question 17

Loan for a specific amount that you must repay in full, including all finance charges, by a stated due date
Examples-Car, Furniture, Major Appliances

Answer 17

Closed-End Credit

Installment Loans

Question 18

Providing a service for which you will pay later

Examples- Utility Services, provided then paid

Answer 18

Service Credit

Question 19

Offer credit cards for just that store

Answer 19

Retail Stores

Question 20

Visa, MasterCard, American Express, Discover

Answer 20

Credit Card Companies

Question 21

Credit union rate = lower than bank

Answer 21

Banks and Credit Unions

Question 22

Organization that makes high risk customer loans

Unions only loan to their members

Answer 22

Finance Companies

Question 23

Unlicensed wonders who charge illegally high interest

Answer 23

Loan Sharks

Question 24

State law that says a max interest rate then maybe charge for customer loans

Answer 24

Usury Laws

Question 25

Legal business that makes high interest loans based on the value of personal possessions pledged as collateral

Answer 25

Pawnbrokers

Question 26

Parents, family members, may or may not charge interest or request collateral; get a promissory note

Answer 26

Private Lenders

Question 27

Terms of the credit card agreement affect the overall cost of the credit you will be using

Answer 27

Credit Card Agreements

Question 28

Annual % rate, cost of credit expressed as a yearly %

Answer 28

APR

Question 29

Time frame in which you may pay your current balance in full and incur no interest rates

Answer 29

Grace Period

Question 30

Annual fees Transaction fees Penalty fees

Answer 30

Fees