Credit Basics
What are the three components of evaluating credit options?
A student loan.
What type of loan is typically used to pay for college?
The maximum amount a person can borrow on a credit card.
What is a credit limit?
Charging interest and fees.
How do credit card companies make money?
When someone steals your personal information to open accounts in your name.
What is identity theft?
A number that shows how good you are at borrowing money and paying it back on time.
What is a credit score?
The original loan amount.
What is the principal?
Someone who can use another person’s credit card but is not responsible for repayment.
What is an authorized user on a credit card?
The percentage of your credit limit that you are using.
What is credit utilization?
A penalty charged by a lender or credit card company when a borrower fails to make a payment by the due date.
What is a late fee?
Getting approval for higher limits, better car insurance rates, low interest rates on credit cards and loans.
What are benefits of having a good credit score?
Taking out a new loan to get a lower interest rate or extend your term.
What is refinancing?
A credit card where you pay a deposit upfront as your credit limit.
What is a prepaid credit card?
The term for the annual cost of borrowing money on a credit card, expressed as a percentage.
What is APR (Annual Percentage Rate) or interest rate?
The immediate action required if a credit card is lost or stolen to prevent fraudulent charges.
What is contacting the credit card issuer to report the loss?
The type of loan that does not require collateral but is granted based on credit history.
What is an unsecured loan?
The type of loan that requires collateral, such as a car or house, to secure the debt.
What is a secured loan?
The most effective way to avoid paying interest on a credit card balance.
What is paying the full statement balance each month?
The method by which credit card companies calculate interest on unpaid balances.
What is compounding interest?
The possible consequence of failing to make payments on a secured loan.
What is repossession of collateral?
Someone who agrees to repay a loan if the borrower defaults.
What is a cosigner?
Amounts owed, new credit, length of credit history, credit mix, payment history.
How is a credit score calculated?
A recommended financial habit to ensure no unauthorized transactions occur on a credit card.
What is regularly reviewing credit card statements?
A law that says you must be 21 to get a credit card unless you have a cosigner or proof of income.
What is the Credit Card Act of 2009?
The financial responsibility of a credit card holder if their card is stolen and used fraudulently, provided the theft is reported promptly.
What is $50?