Vocab 1
Money paid for the use of someone else's money
Interest
What should you do with old credit cards
Cut them up or shred them
True or False; Rebates increase the cost of credit
False
If your annual percentage rate is 18%, how much interest is charged on your bill each month?
18% divided by 12 months/year = 1.5% (or 0.015)
The true annual rate of interest being charged
Annual percentage rate (APR)
A deposit made when buying something expensive like a car or house is called....
A down payment
The method of payment on installment loans, like a car loan, is usually DAILY, WEEKLY, QUARTERLY OR MONTHLY?
MONTHLY
True or False; The cost of credit is determined by subtracting the cash price from the total price which includes the interest/finance charges and other costs
True
If you paid 1.25% a month in interest on a balance, what would the annual percentage rate be?
15%
A partial refund on the amount of money you spent on a purchase
Rebate
The rate of interest charged by banks to their best commercial/business customers is called the PRIME RATE or the ANNUAL RATE?
Prime rate
Fill in the blank: The textbook encourages you to pay for purchases less than $____ with cash.
$25
True or False; Creditors are responsible for assisting you or other consumers in making wise purchases by being honest about their goods, provided services and all the advantages and disadvantages.
True
Use the formula for simple interest I = P X R X T to calculate/solve for the INTEREST if the principal is $600, the rate is 15% and the time is 60 days (60/360). HINT: Remember to turn the 15% into a decimal before multiplying.
Interest = $15
You use this formula (I = P x R x T) to find the ________ _________.
The amount above what you owe, but below your maximum credit limit is....also known as the remaining credit on your account that is available to use and is your credit limit minus what you have already spent.
Unused credit
Fill in the blanks: Fixed-rate loans are loans for which the interest rate does not go ________ or ________ over the life of the loan.
Up or down
True or False; It is your responsibility to contact the creditor/credit company after a month when you find a problem with your bill or discover that a product does not work.
False- contact them immediately. Don't wait.
1/2 or 0.5
This way of figuring out your finance charge first subtracts the monthly payment and then adds the finance charge to the new balance
Adjusting balance method
This way of figuring out your finance charge is based on the average of your credit balance for each day of the month
Average daily balance
Which is the most costly method of calculating interest/finance charges; 1) the adjusting balance method, 2) the average daily balance method or 3) the previous balance method?
The previous balance method
If you are calculating simple interest, the length of time for repayment is shown as a fraction of one year; the denominator is 12 for monthly payments. TRUE OR FALSE; When it is based on the amount of days the denominator is shown as 365.
False- 360
Simplify the TIME of 24/12 months for a simple interest rate.
2