Comprehensive Flashcard Set on Credit and Debt Concepts in Economics

Credit

goods, services, and/or money received in exchange for a promise to pay back a definite sum of money at a future date

Lenders are required to report credit information to...

the credit reporting agencies they choose.

Credit score

a mathematical tool created to help a lender evaluate the risk associated with lending a consumer money.

Opening too many accounts in a short period of time has a...

negative affect on a credit score.

A longer credit history will generally...

increase a credit score.

To rent cars and check into hotels...

you can use a credit card or a debit card.

Cash advance and title pawning businesses charge...

a much higher percentage rate and fees on loans than credit card companies.

Even if you pay off your credit card debt every month, it ...

isn't good to charge purchases because you are more likely to spend more.

Credit Card

interest is charged because money is being borrowed from the credit card company.

Debit Card

the amount is being deducted from your account, so you must have the funds available in your account.

Negative items on a credit report could include:

-missed payments

-collections

-bankruptcy

Credit Reporting Agencies

-Equifax

-Trans Union

-Experian

Information being considered in a FICO score:

-Payment history

-Outstanding debt

-Pursuit of new credit

The only free and reliable website to request a credit report

www.annualcreditreport.com

When requesting a credit report:

-credit scores are available for a small fee

-one free credit report is available annually from each of the three credit reporting agencies

-personal information must be provided

Grace Period

the amount of time allowed before finance charges are applied

Credit Limit

the maximum amount of money the lender is willing to loan an applicant

Introductory Rate

lower interest rate offered by a credit card company, usually for a short period of time

Payday Loans

short-term, high interest rate loans

On average, payday lending, cash advance, and title pawning loans cost the consumer...

400% or more annually.

The problem with using credit cards, even if you pay your balance off each month is...

-you spend an average of 12-18% more when you use a credit card,

-you are more apt to buy on impulse rather than thinking about the purchase.

Key to building wealth

stay debt free

Making minimum payments on your credit card...

-leave you in debt longer

-is usually a much smaller % of the balance than the average interest rate

-are designed to keep you in debt, therefore making credit card companies more money

The main difference between credit and debit cards is...

debit card requires that you have the cash available in the account, a credit card does not.

Why would a business most likely begin to accept credit cards?

-People spend 12-18% more when using a credit card

-find it more convenient to pay with a credit card

so the average price of an order increases

A danger of co-signing a loan...

if the person doesn't pay, you become responsible for the debt.

78% of Americans do not...

pay off their credit card balance every month.

Debt

a product aggressively marketed to consumers