Theme 5 Quiz 5 - Personal Finance & Beyond

Annual Fee

yearly charge for having a credit card

APR

total cost of credit for one year, expressed as a percentage.  APR includes interest and other fees associated with the loan

Credit Limit/Line

* maximum amount of credit extended to you by bank or credit card issuer 

Finance Charge

total dollar amount you must pay for the credit card you use. Charges may include interest and other fees (loan application fee)

Grace Period

period of time during which you are not charged interest on new purchases (if you have no outstanding balance)

Interest

the price of using credit

Interest Rate

the price of using credit expressed as a percentage of the amount owed

Late Fee

a penalty, in addition to interest that is charged if payment is received after the due date

Minimum Payment

 the lowest amount you must pay toward your credit balance each month

Pros of using credit

1\. Consumer Protection

2\. Benefits and Rewards

Cons of using credit

1\. Overspending

2\. High interest rates

**Credit Score**

Numeric summary of your credit history

 poor vs excellent credit score

 300 (poor) - 850 (excellent)

How does your credit score go up?

On-time payments

hy does your credit score go down?

Number of open accounts (too much credit)

Why is good/excellent credit necessary?

access to more options, lower interest rates, and more lender choices.

What criteria is used in determining one’s credit score?

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* On-time payments
* Credit use vs credit limits (credit utilization)
* Long credit history
* Credit mix
* Timing of new credit
* Number of open accounts (too much credit)

Causes of Credit Card Debt

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* Bad spending
* Bad payments

How to Avoid Credit Card Debt

Pay your balance full this month

**Different Types of Rewards**

* benefits such as rewards, cash back, travel points, etc

Secured loan

the Borrower puts up collateral as a promise the loan will be repaid

Unsecured loan

 no collateral needed for loan