Personal Finance - Chapter 6
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25 terms
Terms | Definitions |
|---|---|
 Credit | Receiving cash, goods, or services with an obligation to pay later. |
| Consumer Credit | Credit purchases for personal needs other than for home mortgages - this can include anything from an auto loan to credit card debt. |
| Open Credit or Revolving Credit | A line of credit that you can use and them pay back at whatever pace you like so long as you pay a minimum balance each month, paying interest on the unpaid balance. |
| Annual Percentage Rate (APR) | The true simple interest rate paid over the life of the loan. It's a reasonable approximation for the true cost of borrowing, and the Truth in Lending Act requires that all consumer loan agreements disclose the APR in bold print. |
| Method of Determining the Balance (or Balance Calculation Method) | The method by which a credit card balance is determined. The finance charges are then based on the level of this balance. |
| Average Daily Balance Method | A method of calculating the balance on which interest is paid by summing the outstanding balances owed each day during the billing period and dividing by the number of days in the period. |
| Previous Balance Method | A method of calculating interest payments on outstanding credit using the balance at the end of the previous billing period. |
| Adjusted Balance Method | A method of calculating interest payments on outstanding credit in which interest payments are charged against the balance at the end of the previous billing period less any payments and returns made. |
| Grace Period | The length of time given to make a payment before interest is changed against the outstanding balance on a credit card. |
| Annual Fee | A fixed annual charge imposed by a credit card. |
| Merchant's Discount Fee | The percentage of the sale that the merchant pays to the credit card issue. |
| Cash Advance Fee | A charge for making a cash advance, paid as either a fixed amount or a percentage of the cash advance. |
| Late Fee | A fee imposed as a result of not paying your credit card bill on time. |
| Over-the-Limt Fee | A fee imposed whenever you go over your credit limit. |
| Penalty Rate | The rate you pay if you don't make your minimum payments on time. |
| Bank Credit Card | A credit card issued by a bank or large corporation, generally as a Visa or MasterCard. |
| Premium or Prestige Credit Card | A bank or travel and entertainment (T&E) credit card that offers credit limits as high as $100,000 or more in addition to numerous added perks, including emergency medical and legal services, travel services, rebates, and insurance on new purchases. |
| Affinity Card | A credit card issued in conjunction with a specific charity or organization. It carries the sponsoring group's name and/or picture on the credit card itself and sends a portion of the annual fee or a percentage of the purchases back to the sponsoring organization. |
| Secured Credit Card | A credit card backed by the pledge of some collateralized asset. |
| Travel and Entertainment (T&E) Card | A credit card initially meant for business customers to allow them to pay for travel and entertainment expenses, keeping them separate from their other expenditures. |
| Single-Purpose Card | A credit card that can be used only at a specific company. |
| Traditional Charge Account | A charge account, as opposed to a credit card, that can be used to make purchases only at the issuing company. |
| Credit Bureau | A company that gathers information on consumers' financial history, including how quickly they have paid bills and whether they have been delinquent on bills in the past. The company summarizes this information and sells it to customers. |
| Credit Scoring | The numerical evaluation or "scoring" of credit applicants based on their credit history. |
| Identity Theft | The use of your name, address, Social Security number (SSN), bank or credit card account number, or other identifying information by someone other than you without your knowledge to commit fraud or other crimes. |
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