Week 1 Flashcards
What are the two types of credit?
Open End Credit and Closed End Credit
What is the Open-End Credit?
A credit that is extended on a continuous basis without the need to reapply
What is the Closed-End Credit?
A credit there’s a specific payment and payment period for a specific loan amount.
What are the two types of open-end credit?
Short-term and Revolving
What is the Short-Term Open-End Credit?
A credit requires a payment at the end of each month.
What is the Revolving Open-End Credit?
This means the borrower can keep using the credit without paying it in full at the end of each month. The most common form of revolving credit for most of us is a credit card.
What is a Credit Card?
It enables people to purchase goods or services using borrowed money
What is a Debit Card?
A card that can be used for purchases and cash withdrawals directly from your personal bank account.
What is an ATM Card?
Money is deducted from your checking account after you have provided a Personal Identification Number (PIN).
What is a Check Card?
They are also tied to your checking account. You can use them at a ATM machine and to make purchases. If you use your card as a credit card, you’ll likely be asked to provide your signature.
What is the Charge Card?
This is a less common type of credit card that requires the balance to be paid off each month.
What is a Stored Value Card?
This is another type of plastic card that is more likely to be cash. Typically, you buy a stored value card with a certain value. After you use the card, you may be able to add more value to it
What is a Smart Card?
This is another type of plastic cards, they are already being used extensively in Japan and Europe. A smart card is a card with a “brain” in it, the brain being a small embedded computer chip.
What is Credit?
When you borrow money to purchase something and promise to pay the money back later.
What is Principal?
The amount of money borrowed
What is a Finance Charge?
This is the interest charges on the amount you owe.
What is the Interest Rate?
This is the interest charged over time for using credit, written as a percent of the principal over one year.
What is the Simple Interest?
The interest is only paid on the original amount borrowed for the length of tie the borrower has use of the credit.
What is Compound Interest?
Interest is calculated on the original principal plus all interest accrued to that point in time.
What is a Credit Score or Rate?
This will show how well you pay off your credit and other bills
What is an Installment Loan?
A form of credit where the money is borrowed all at once.
What is a Secured Loan?
Security or collateral is used to guarantee the loan. If you fail to repay loan, the lender keeps the security
What is an Unsecured Loan?
This is made solely on the person’s promise to repay the loan
What is a Loan?
The bank gives you money to buy car. Over the next 3 to 5 years you pay back the principal and interest.
What is a Lease?
Payments are made for the right to use the car. At the end of the period, the bank takes the car.
What is a Mortgage?
A long-term loan to buy a house or other property.
What is an Escrow?
This is a monthly payment on property, which includes the mortgage and other costs.
What is the Closing Cost?
It is when the final purchase of a home occurs, called a closing, the costs can reach thousands of dollars for taxes, fees, insurance and lawyer fees.
