PFP 3301 Chapter 6
Terms
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- the proportion of total monthly consumer credit obligations to monthly take-home pay
- debt safety ratio
- a form of credit extended to a consumer in advance of any transaction; type of credit that accompanies charge accounts and credit cards
- open account credit
- a specified amount beyond which a customer may not borrow or purchase on credit
- credit limit
- a monthly statement that summarizes the transactions, interest charges, fees, and payments in a consumer credit account
- credit statement
- a credit card issued by a bank or other financial institution that allows the holder to charge purchases at any establishment that accepts it; can also be used to obtain cash advances
- bank credit card
- the maximum amount of credit a customer is allowed to have outstanding at any point in time
- line of credit
- a loan that can be obtained by a bank credit cardholder at any participating bank or financial institution; it begins to accrue interst immediately and requires no formal application
- cash advance
- a program that enables cardholders to readily transfer credit balances from one card to another
- balance transfer
- a bank credit card that combines features of a traditional bank credit card with an additional incentive, such as rebates and airline mileage
- rebate (co-branded) credit card
- the rate of interest a bank uses as a base for loans to individuals and small to midsize businesses
- base rate
- a short period of time, usually 20-30 days, during which you can pay your credit card bill in full and not incur any interest charges
- grace period
- a type of credit card issued by retailers, airlines, and so on, that allows customers to charge goods and services up to a preestablished amount
- retail charge card
- a charge account that requires customers to pay the full amount billed within 10 to 20 days after the billing date
- 30-day (regular) charge account
- a credit card, such as American Express or Diners Club, accepted by travel and entertainment-related establishments, as well as a growing number of other businesses and stores
- travel and entertainment card (T&E)
- a type of bank or T&E card that offers higher credit limits, has stricter requirements for qualification, and generally offers more features than its "regular" counterpart
- prestige card
- a standard bank credit card issued in conjunction with some charitable, political, or other sponsoring nonprofit organization
- affinity cards
- a type of credit card that's secured with some form of collateral, like a bank CD
- secured (collaterized) credit cards
- a credit card marketed specifically to college students
- student credit card
- a card used to make transactions for cash rather than credit; replaces the need for cash or checks by initiating charges against one's checking account
- debit card
- a plastic card with a magnetic strip or microchip that stores the amount of money the purchaser has to spend and deducts the value of each purchase; eliminates the need to use cash
- prepaid card
- a type of open account credit offered by banks and other financial institutions that can be accessed by writing checks against demand deposit or specially designated credit line accounts
- revolving line of credit
- a line of credit linked to a checking account that allows a depositor to overdraw the account up to a specified amount
- overdraft protection line
- a line of credit made available to an individual on an as-needed basis
- unsecured personal credit line
- a line of credit issued against the existing equity in a home
- home equity credit line
- an investigation that involves contacting credit references or corresponding with a credit bureau to verify information on a credit application
- credit investigation
- an organization that collects and stores credit information about individual borrowers
- credit bureau
- a method of evaluating an applicant's creditworthiness by assigning values to such factors as income, existing debts, and credit references
- credit scoring
- the actual or true rate of interest paid over the life of a loan
- annual percentage rate (APR)
- a method of computing finance charges by applying interest charges to the average daily balance of the account over the billing period
- average daily balance (ADB) method
- in open account credit, a minimum specified percentage of the new account balance that must be paid in order to remain current
- minimum monthly payment
- a form of legal recourse open to insolvent debtors in which they may petition a court for protection from creditors and arrange for the orderly liquidation and distribution of their assets
- personal bankruptcy
- an arrangement for scheduled debt repayment over future years that is an alternative to straight bankruptcy; used when a person has a steady source of income and there is a reasonable chance of repayment within 3 to 5 years
- Wage Earner Plan
- a legal proceeding that results in "wiping the slate clean and staring anew"; most of a debtor's obligations are eliminated in an attempt to put the debtor's financial affairs in order
- straight bankruptcy
- a professional financial advisor who assists overextended consumers in repairing budgets for both spending and debt repayment
- credit counselor