| April 2007 P2 Money
Quiz Answers
Credit Industry Terms
1. Charge card - Card on which purchases must be paid in full each month.Charge cards and credit cards are not the same. While credit cards offer revolving credit (from month to month), a charge card balance must paid at the end of each billing period.
2. Fixed rate - APR that doesn't fluctuate. An interest rate that doesn't change during the life of the loan.
3. Introductory rate - Low APR that goes up after given period. To entice customers, many credit card companies offer zero or low APRs for the first few months (or "introductory" period), then they increase the APR.
4. Interest - Fee added to your unpaid balance. Credit card companies let you go without paying your bill in full each month - for a price. This is interest, the extra amount you pay for the "favor" of carrying over an unpaid balance.
5. Minimum payment - Minimum amount due each month to avoid late fees.
6. Annual fee - Yearly credit card fee. A yearly fee that some companies will charge you for the use of a credit card.
7. APR - Annual Percentage Rate. Short for "Annual Percentage Rate," APR is the percentage of each bill you'll pay in interest if you don't pay your bill in full. The higher the APR, the more you pay in interest.
8. ARM - Adjustable Rate Mortgage. Short for "Adjustable Rate Mortgage," an ARM is a mortgage that has a variable interest rate.
9. HELOC - Home Equity Line of Credit. Short for “Home Equity Line of Credit," a HELOC is a loan that has an open line of credit and is a revolving account, similar to a credit card, but with a much higher limit. The borrower uses the equity in the home to secure the loan.
10. PMI - Private Mortgage Insurance. Short for “Private Mortgage Insurance," PMI is sold to protect the mortgage company in the instance of a default (failure to pay). The premium is paid by the homeowner/buyer to insure the top 5% to 10% of the loan amount on a 90% or 95% loan. It is used to facilitate lower down-payment loans.
BONUS. Name the 3 National Credit Bureaus. - Equifax, Experian, and TransUnion. There are three national credit bureaus, Equifax, Experian, and TransUnion, who collect and store credit information on approximately 200 million consumers. In addition, the bureaus collect and maintain public record information, as well as information from smaller manual contributors. |
