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Personal Finance > Ch 25 > Flashcards

Flashcards in Ch 25 Deck (21)
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1

What is credit

Privilege of using someone else's money for a period of time

2

Debtor

Anyone who buys on credit or receives a loan

3

Creditor

The one who sells on credit or makes a loan

4

Consumer credit

Money borrowed for personal reasons

5

Commercial credit

Money borrowed by manufacturers

6

Benefits of credit

Convenience
Immediate possession
Extra savings
Build up credit rating
Useful in emergency

7

Precautions of credit

Overbuying
Careless buying
Higher prices due to interest
Overuse

8

Credit rating

A measure of your ability and willingness to pay debts in time

9

Interest

Cost of borrowing money

10

Charge accounts

Short or medium term credit
Often offered by stores

11

Regular charge accounts

Required to pay bill in full every 25-30 days

12

Revolving credit account

Allows you to borrow up to a set amount and pay back some or all of it each month

13

Budget charge accounts

Installment credit
Pay in equal payments each month

14

Credit card companies earn money by

Interest and fees
Charge stores 1-2% of the purchase price for letting you use credit

15

Single purpose credit cards

Buy goods and services only from the issuing store

16

Multipurpose credit cards

Used almost anywhere

17

Travel entertainment cards

Regular charge account
Annual fees are higher

18

Single payment loan

Debt pays back the loan all at once at end of loan period
Farmers

19

Installment loan

Regular even payments
Principal+ interest

20

Mortgage loan

Installment loan for a home
15-30 yr loan

21

Payroll advance services examples

Pawnshop
Payroll advance