Questions and Answers
What is credit?
What does interest refer to?
The amount the borrower must pay for the use of someone else's money.
What is principal?
The amount originally borrowed.
What is installment debt?
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What are consumer durables?
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What is a mortgage?
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What is the main function of a commercial bank?
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What is the role of a savings and loan association?
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What are savings banks known for?
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What is a credit union?
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What does a finance company do?
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What is a consumer finance company?
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What are charge accounts?
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What is a regular charge account?
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What is a credit limit?
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What defines a revolving charge account?
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What is an installment charge account?
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What does a credit card allow a person to do?
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What is a debit card?
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What is a finance charge?
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What does the annual percentage rate represent?
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What is a credit bureau?
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What is a credit check?
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What is a credit rating?
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What is collateral?
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What is a secured loan?
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What is an unsecured loan?
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What are past-due notices?
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What does a cosigner do?
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What is a usury law?
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What is bankruptcy?
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Study Notes
Credit
- Receiving money to purchase goods and services now, with a promise to repay in the future.
Interest
- Cost incurred by a borrower for using someone else's money.
Principal
- The original amount borrowed in a loan.
Installment Debt
- Loans repaid with equal payments over time.
Consumer Durables
- Manufactured items used for long periods before replacement.
Mortgage
- An installment debt secured by real property, like homes or land.
Commercial Bank
- Financial institutions that accept deposits, lend money, and facilitate fund transfers.
Savings and Loan Association
- Similar to commercial banks; accepts deposits and provides loans.
Savings Banks
- Primarily derive business from savings accounts and home loans.
Credit Union
- Member-owned organization providing savings accounts and low-interest loans to its members.
Finance Company
- Purchases installment debt contracts from stores, charging fees for debt collection.
Consumer Finance Company
- Offers loans directly to consumers with higher interest rates.
Charge Accounts
- Allow customers to buy from a specific company and defer payment.
Regular Charge Account
- Known as a 30-day charge with predetermined credit limits (e.g., $500 or $1000).
Credit Limit
- Maximum amount allowed for purchases made on credit.
Revolving Charge Account
- Enables additional purchases even if previous month's bill remains unpaid.
Installment Charge Account
- Permits items to be bought and paid for through equal payments over time.
Credit Card
- Enables purchases without the immediate need for cash.
Debit Card
- Facilitates cashless purchases by electronically transferring funds.
Finance Charge
- The cost of credit, presented in monetary terms.
Annual Percentage Rate (APR)
- Annualized cost of credit expressed as a percentage.
Credit Bureau
- A private entity conducting credit checks on individuals.
Credit Check
- An assessment revealing income, current debts, and credit repayment history.
Credit Rating
- An evaluation assessing the risk of lending money to an individual or business.
Collateral
- An asset purchased with loan funds, like a house or vehicle.
Secured Loan
- A loan supported by collateral that can be reclaimed if unpaid.
Unsecured Loan
- A loan provided based on the borrower's reputation, with no collateral.
Past-Due Notices
- Notifications alerting that a payment deadline has not been met.
Cosigner
- A person who agrees to join in signing a loan when the primary borrower lacks a strong credit rating.
Usury Law
- Legislation limiting the amount of interest that can be charged on loans.
Bankruptcy
- A legal process for individuals unable to repay excessive debts accumulated from multiple loans or credit usage.
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Description
Test your understanding of key credit terms in economics with these flashcards. Each card provides a definition of essential concepts like credit, interest, principal, and installment debt. Perfect for students looking to strengthen their financial literacy.