Chapter 6 & 7

Question 1

Credit

Answer 1

being able to obtain money now that has to be payed back later

Question 2

Who uses credit?

Answer 2

consumers and businesses and governments of all kinds

Question 3

Why use credit?

Answer 3

• typically used to pay for goods and serveses that not not be presently afforded
• four main reasons:
  ~ to avoid paying cash for large purchases
  ~ to meet a financial emergency
  ~ for conveince
  ~ for an investment purchase

Question 4

Improper uses of credit

Answer 4

• overspending
• minimum monthly payments
• staying on top of payments

Question 5

Establishing credit

Answer 5

• open a checking and savings account
• open one or two change accounts
• obtain a loan
• build a strong credit history

Question 6

How much credit can you stand?

Answer 6

• debt safety ratio / the portion of total monthly consumer credit obligations to monthly take home pay
• equation / monthly credit divided by the monthly take home pay = debt safety ratio

Question 7

open account credit

Answer 7

a form of credit extended to consumer in advance of any transaction

Question 8

credit limit

Answer 8

a spesivie amount beyond which a consumer may not borrow or purchase on credit

Question 9

credit statement

Answer 9

monthly statement that summarizes everything (transactions and payments and fees)

Question 10

two sources of open account credit

Answer 10

financial institutions (banks) or retail stores

Question 11

bank credit cards

Answer 11

credit card issued by a back allowing the holder to allow purchase at any establishments that accept it

Question 12

line of credit

Answer 12

the max amount of credit a customer is allowed to have at any point in time

Question 13

cash advabtages

Answer 13

loans that can be obtained by a card holden at any participating bank

Question 14

grace period

Answer 14

a short period of time during which you can pay your bank credit card in full and not obtain any interest

Question 15

rewards credit card

Answer 15

back credit card that have the traditional features but with additional incentives

Question 16

student credit cards

Answer 16

marketed at college/do not sign up/scan

Question 17

retail issued credit cards

Answer 17

issued by retailer to allow customers to charge a certain amount per month

Question 18

debit cars

Answer 18

used to make transactions for cash rather than credit

Question 19

prepayed cards

Answer 19

gift cards

Question 20

oppening an account

Answer 20

• submit a credit application
• lender will then do a credit investigations
• lenders will check with the credit bureau to verify information

Question 21

credit source

Answer 21

the method of evaluation an applicant’s worthiness by setting values to certain factors

Question 22

annual percentage rate (APR)

Answer 22

the actual or true rate of interest paid over the life of a loan