Credit Terms 1
The smallest amount of a credit card bill that a credit card holder must pay during a billing cycle to remain in good standing with the lender
Minimum Payment
The rate charged for borrowing money usually expressed as a percent of the amount borrowed
Interest Rate/APR
APR = __________
Annual Percentage Rate
Initial sum of money borrowed, lent, or invested, on which interest is paid
Principal
At what age can you apply for a credit card?
18 years old
1) What score (& above) is considered the baseline for a "GOOD" credit score? (across all 3 major bureaus)
2) What is the possible range of credit score(s)
1) 700+
2) 300/350 - 850/900
The maximum amount that may be borrowed on a credit card
Credit Limit
The amount of money owed on a line of credit
Balance
Provide one example for each term...
Closed-end credit:
Open-end credit:
Closed-end: Mortgage, Auto loan, Personal loan, Student loan...
Open-end: Credit cards, Charge Cards
Someone who legally agrees to take responsibility for a person's debt if they cannot repay it
Co-Signer
Bankruptcy can last on your credit report for ________
7-10 years
You have a Bank of America credit card with a limit of $2,500, and you've charged $950.00 worth of purchase spending this month. How much is your current balance?
$950
Besides simply making the minimum monthly payments, there are two common and effective strategies for paying down debts in a faster and cheaper manner.
1) Name both of the strategies
2) Describe how each method/strategy works
High Rate/Interest/Avalanche Method: paying debts off in order of highest-lowest interest rates
Balance/Snowball Method: paying off debts in order of lowest-highest balances
A yearly fee that may be charged for having a credit card, independent of how you use the card
Annual/Maintenance Fee
A fee charged if your payment is received after the due date
Late Payment Fee
These are the three independent agencies that calculate your credit score
1. Equifax
2. Experian
3. TransUnion
An asset that a lender accepts as security for a loan
Collateral
Name three different reasons/examples/ways that having good, established credit can help you financially...
Securing a loan; Better interest rates; Insurance discounts; Access to the best credit cards; Better terms and availability on loan products...
You have a Wells Fargo credit card with a limit of $2,000, and you've accumulated a $850.00 balance, due to spending this month. When you receive this month's statement, you pay $500.00 towards the bill. As a result, how much is your current balance?
$350
A credit card service that allows cardholders to withdraw a certain amount of cash, either through an ATM or directly from a bank, typically at a high interest rate or for a fee
Cash Advance
Name 3 ways a credit card offer might try to sell their services to you
"Pre-approval"
"0% APR for _____!" / low advertised rates
Rewards, Discounts, or Promos
Flashy appearance or feel
Personalized to you...
Debt not tied to a specific asset, making it difficult or impossible for the lender to repossess items if payments are not made
Unsecured Debt
A time period automatically granted on a loan during which the borrower does not have to pay the issuer any monies toward the loan, and the borrower does not incur any penalties for not paying.
Grace Period
What factor carries the most weight or influence on your credit score? + (for 100 extra points: apx. what percentage of your credit score does it impact?)
Payment history / on-time payments
35%
You have a Wells Fargo credit card with a limit of $2,000, and you've accumulated a $750.00 balance, due to spending this month. When you receive this month's statement, you pay $500.00 towards the bill. As a result, how much available credit do you now have?
$1,750
A higher interest rate triggered by being late with or missing a credit card payment
Penalty APR
The act of transferring debt from one credit card account to another, usually for a fee
Balance Transfer
Known as the ______ _______ rate, this percentage is set by this central government entity (______ ______) that determines the interest rates at banks.
Federal Funds Rate OR Prime Lending Rate; The Federal Reserve
The paying off of debt with a fixed repayment schedule in regular installments over a period of time
Amortization / Amortized Loan
Name 4 of the 5 major factors that contribute to your score
1. Payment History
2. Total Balances/Amount of Available Credit Used
3. Length of Credit History
4. Number of Recent Inquiries
5. Mix of Credit Held