1. CREDIT VOCABULARY

2.  Credit = a promise to pay in the future for an item you purchase today.  Finance charge = the cost of using credit. This is usually interest and/or fees.  Installment plan = pay for an item over a period of time. Requires a down payment, monthly payments and a finance charge. VOCABULARY 4.1

3.  Layaway plan = similar to installment plan only the item is kept in the store until you pay in full. High finance charges.  Deferred payment plan – similar to installment plan. Low monthly payments for a period of time and then the remainder must be paid in full. High finance charges.  Rent-to-own = make a down payment, receive the item. Make monthly payments that add up to less than the total cost. Consumer decides on paying it off or giving it back. VOCABULARY 4.1

5.  Bank card = credit card offered through your bank. Examples: Bank of America Visa  Store credit card = credit card that you can use only at that store (avoid these). Examples: Macy’s, Nordstrom, etc.  Charge card = credit card that you have to pay off every month. No interest rate or minimum payment Example: gas card, American Express  Co-branded card – retail store + Visa or Mastercard. Accepted anywhere. Example: Target Visa VOCABULARY 4.4

6.  APR = Annual Percentage Rate. Interest rate charged for the year. To get monthly rate divide by 12. To get daily rate divide by 365.  Truth-in-Lending-Act = protects you if your card is lost or stolen & requires information about cost of the card  Responsible for $50 and no charges after you report it stolen.  If no charges are made before you report it then you owe $0 VOCABULARY 4.4

7.  Required for all credit card offers  Tells the costs of the card SCHUMER BOX

9.  APR = interest rate charged for amount borrowed. Average rate = 13.02 – 15.68 but can be as high as 36%  Grace period = amount of time allowed before finance charges (interest) is applied  Minimum finance charge = minimum amount charged for using the card

10.  Balance Calculation Methods: method used to determine the balance for finance charges 1.Average Daily Balance not new purchases = interest paid only on the previous balance, not on new purchases since last payment 2.Average Daily Balance + new purchases w/ grace period = if balance ≠ 0 then interest is applied to new purchases. If the balance = 0 then a grace period is allowed before interest is charged 3.Average Daily Balance + new purchases, no grace period SCHUMER BOX

11.  Annual fees = yearly charge for credit card ownership  Cash Advance Fees = fees for getting cash with the card  Late payment fees = charge for paying late SCHUMER BOX Annual Percentage Rate for Purchases Grace Period for Purchases Minimum Finance Charges Balance Calculation Method for Purchases Annual FeesTransaction Fees for Cash Advances Late Payment Fees 19.9% Not less than 25 days $.50 when a finance charge at a periodic rate is charged Average daily balance method (including new purchases) $20 per year 2% with a minimum fee of $3 $29