Chapter 18-Responsibilities And Costs Of Credit Flashcards
Rate of interest is charged by banks to their best commercial (business) customers
Prime rate
The total amount that is financed or borrowed, on which interest is computed
Principle
The portion of purchase price refunded
Rebate
The amount above what you owe, but below your maximum credit limit
Unused credit
When computations to determine interest involve the formula I=P times R times T, this is….interest
Simple
Money paid for the use of someone else’s money
Interest
The simple interest equation is expressed as a fraction of a year
Time
A deposit that is often made when purchasing a large or expensive item to ensure that you will continue to make payments
Down payment
Legal process that allows part of your check to be withheld for payment of a debt
Garnishment
The true annual rate of interest being charged
Annual percentage rate
Always expressed as a percentage in the simple interest equation
Interest rate
Method of computing finance charges first subtracts the monthly payment and then adds the finance charge to get the new balance
Adjusted balance
Method of computing finance charges first computes the finance charge and add it to the balance, and then subtracts the payment to get the new balance
Previous balance
Method of computing finance charges based on the average of credit balances from each day during the month
Average daily balance
The cost of credit is determined by subtracting the cash price from the total price including all financial charges and other costs
True
The rate of interest that banks offer to their very best individual (non commercial) customers is called prime rate
False
The time of repayment of a loan is expressed in the fraction of a year; the denominator is 12 months or 360 days
True
To determine simple interest, multiply the number of payments by the amount of each payment; then subtract from the principle
False
The average daily balance method often results in a lower finance charge than does the previous balance
True
It is your responsibility to your creditors to limit spending to amounts that can be repaid according to credit agreement
True
Rebates often serve to increase the cost of credit
False
The down payment is part of the retail installment contract
True
Individuals pay…..than the rate of interest that banks offer to business accounts
More
As your income increases, you…….increase your credit
Should not
A good rule of thumb is that purchases under…..should not be charged but paid in cash
$25
The method of payment on installment loans is usually
Monthly
A trade on is……the purchase price of merchandise to determine the principle of a loan
Subtracted from
The amount of credit above what you owe is called
Unused credit
