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Module 13 Notes

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0% found this document useful (0 votes)
10 views3 pages

Module 13 Notes

Uploaded by

reeyanpeekaboo69
Copyright
© © All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
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Download as PDF, TXT or read online on Scribd
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BOOK

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Credit - Receiving goods, services, or cash with an obligation to pay later. Credit
purchases made for personal needs other than home mortgages are referred to as
consumer credit.

Open or revolving credit - Credit that doesn’t get paid on time and gets put into the next
month with interest

Line of credit - The bank offers a maximum loan amount which the borrower could
borrow at any time

Annual percentage rate - The true simple interest paid over the life of the loan. It takes
into consideration most fees and is calculated in the same way by all vendors. Some
cards have fixed APRS, some have variable APRs.

Teaser fees are also a thing that can increase after the introductory period. Credit card
fees also compound.

Calculate average daily balance method for calculating credit balance or fees - Average
fees for each day and take interest on that.

Previous balance method - Interest paid based on what you owed in the last billing
period.

Adjusted balance method - Same as previous balance but only off of when payments
have been subtracted.

Cash advance - A quick short-term loan to quickly access money


Withdrawing cash advance is more expensive since interest begins immediately.

Grace period - A set of time given by the lender before you pay interest on the
outstanding balance. Some credit card lenders issue an annual fee for using a card.

There are cash advance fees, late fees, over-the-limit fees, and penalty rates if you don’t
make minimum payments on time.

Credit cards are useful for making reservations, and it would have been nearly
impossible otherwise.

Bank credit card - Credit card issued by a bank or a large corporation. They offer many
benefits and reward systems and are efficient. There are variations of cards which offer
benefits.
Affinity card - A card that is issued in conjunction with another charity or organization
Secured credit card - A card hooked up to another asset if you can’t pay the balance

Travel and entertainment cards - Like bank credit cards except that they don’t offer
revolving credit-you must pay full balance each months and have high annual fees

Single-purpose cards - Only let you use the cards at a specific store and decide whether
to have revolving credit or not

Traditional charge account - A type of open credit, in the way that you get services now
and pay for them later.

If you are a credit user, the most important thing is the APR since it is the largest
expense. For convenience users, they don’t care about the APR since they pay off the
balance.

FIVE Cs of CREDIT:
- Character: Sense of responsibility with debt payment. (Paying it back on time),
stability as well.
- Capacity: Lenders look at current level of income and borrowing, nonobligated
income. Recommended that total debt should account for less than 36% of gross
pay
- Capital: Refers to size of financial holdings and investment portfolio, bigger the
better
- Collateral: Refers to assets you would have if you default, bigger the better
- Conditions: Refers to the impact of the economic environment may have on your
ability to repay your money

Credit bureau - A private organization that maintains credit information on individuals


where people can access for a fee

Credit scoring can allow lenders and borrowers to see their trust level. There are two
scoring systems, FICO and VantageScore. FICO is more dominant. Mortgages cost less
with a higher credit score. It is not the only factor.

Payment history, amount you owe, length of credit history, types of credit used, and new
credit all play into the score.
Merchants discount fee - The fee to process credit and debit card transactions

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MR ZIRKLE VIDEOS
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Annual percentage rate - The true simple interest paid over the life of the loan
Effective interest rate - The real interest rate that is paid
Annuity - A series of equal dollar payments coming at the end of each time period for a
specific number of periods

Compound annuity - Depositing a certain value of money at the end of each year for a
certain number of years allowing it to grow.

Amortized Loans - Loans paid off in equal installments


Perpetuity - A payment that comes in periods forever (formula for present value = annual
dollar amount / interest)

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