Chapter 2 Flashcards
- annual percentage rate (APR)
the cost you pay to borrow money as a percent
- finance charge
the total cost of borrowing money
principal
the original sum
- maturity date
when the payment is due for a loan
- minimum payment
the smallest amount that will be accepted as being on your credit card at the end of the month
bankruptcy
a way to liquidate assets and have people help come up with a plan to get you out of debt
installments
a single amount of money paying towards a larger total
- annual fee
a yearly charge for use of your credit card
collateral
something offered up to be taken if you can’t pay off your loan
- credit history
your history of payments, loans, and debts
- periodic rate
total cost of an annual rate per month
- variable rate
an interest rate that varies based on underlying variables
default
failure to make required payments
- unsecured loan
loans that can get you in debt without collateral
cosigner
someone who agrees to get you out of debt if you fail
to pay when you have no collateral
- deficit spending
constantly spending money you don’t have
What is the one big advantage of credit?
you can buy something without the money
What are three advantages of using credit?
You can buy things without the money, day-to-day purchases are more convenient, and they are very useful in emergencies
What are two disadvantages of using credit?
you could spend too much money and you could make impulse purchases that you can’t afford
In dollars, how much debt does a young college graduate have upon graduation?
more than $25,000
What are the five most common sources of credit?
store charge accounts, credit cards, charge cards, installment loans, and layaway plans
Identify five tips for managing your credit ?
pay bills on time, don’t think of credit as extra cash, don’t borrow more than the budget allows, pay other bills, and limit to 2 credit cards
What are 6 requirements to get a credit card
18 or older, steady employment, a checking or savings account, a history of paying bills on time, an income that exceed budgeted expenses, and a permanent residence
What are the 3 C’s of credit?
character, capacity, collateral
What organization tracks your use of credit? What does this organization provide?
credit bureau, credit information of people
Briefly describe credit history
record of a use of credit
What 6 steps help reduce the risk of credit card fraud?
always sign your credit card, save receipts, never give out your credit card, make safe purchases online, destroy preapproved credit offers, destroy old or canceled credit cards
Deficit spending can cause more than a stress on your wallet. What three problems can deficit spending cause?
stress, hurt family and social life, and poor job performance
What three steps should you take once you think you are in trouble with deficit spending?
stop borrowing money, cut expenses, talk to creditors
What is Chapter 7 Bankruptcy?
you can erase most of your debt if you are on a low income
What is Chapter 13 Bankruptcy?
you can repay debts over 5 years, but a court will oversee it
What is the means by which people protect themselves from loss or liability incurred as a result of unexpected events and on what principal does it work?
insurance
the 6 major types of insurance are:
auto insurance, property insurance, liability insurance, health insurance, disability insurance, and life insurance
The major 5 major types of auto insurance are:
collision, comprehensive, liability, uninsured motorist protection, and emergency road service
What factors determine Automobile Insurance Rates
your driving history and the history of people with the same characteristics as you
What are two types of medical plans?
medicare, medicaid
What is the purpose of disability insurance?
if you are injured in a way that impacts your job, you get paid a portion of your salary by the insurance company
Identify and describe the three types of life insurance?
term life insurance- if you die within a span of time
whole life insurance- if you ever die
universal life insurance- insurance for a span of time that accumulates as savings
