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Credit Unit Vocabulary
Fun review of all your favorite credit vocabulary terms!
Terms in this set (27)
Average Daily Balance
Method by which most credit cards calculate the finance charges for the period. It is found by adding each day's balance and then dividing the total number of days in a billing cycle.
Annual Percentage Rate (APR)
the cost of credit expressed as a yearly percentage
The process of moving unpaid credit debt from one issuer to another.
A charge by the lender for using the credit card to obtain cash. Can be a flat rate or percentage.
The written statement provided to the cardholder outlining the terms and conditions
The minimum amount a cardholder can pay to keep the account from going into default.
When a potential customer has passed a preliminary credit-information screening. Does not guarantee a line of credit.
A credit card that a cardholder secures with a savings deposit to ensure payment of their outstanding balance if the account defaults on payment
A below-market interest rate offered to entice customers to switch lenders
Variable Interest Rate
An interest rate that changes periodically based on changes in other interest rates
An arrangement to receive cash, goods, or services now and pay for them in the future
When credit is used for personal needs
An entity that that lends money. Examples include financial institutions, merchants, and individuals.
a portion of the total cost of an item that must be paid at the time of purchase
cost of the next best alternative use of money, time, or resources when one choice is made rather than another
a one time loan that will be paid back over a specified period of time, in payments of equal amounts.
A legal document showing ownership of an item
Installment Sales Credit
Used for the purchase of merchandise, typically requires a down payment with remaining balance of loan being paid in installments.
Installment Cash Credit
Money borrowed for personal reasons, does not necessarily require a down payment, balance is paid in installments.
Single Lump-Sum Credit
A loan that must be paid in full, by a specified day, typically within 30-90 days
Credit as a loan with a certain limit on the amount of money you can borrow for a variety of goods and services.
Line of Credit
The maximum amount of money a creditor will allow a credit user to borrow
Home Equity Loan
a loan based on the difference between the current market value of your home and the amount you still owe on the mortgage
Credit cardholders who pay off their balances in full each month
Credit cardholders who do not pay off their balances in full each month
the total dollar amount you pay to use credit
Card Member Agreement
A legally required document which outline the terms and conditions between a credit user and credit issuer.
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