Consumer credit closed- end credit and open-end credit by yaofenji


									Consumer credit: closed- end credit and open-end credit
  1. Closed-end Credit
     Used for specific purposes and involves specific amount
     Mortgage loans, automobile loans, installment loans- examples
     Usually involve a written agreement for each credit purchase
     3 common types: installment sales credit, installment cash credit, single lump-sum
     Installment sales credit: loan that allows to receive merchandise, usually high
      priced items
     Installment cash credit: direct loan of money for personal purposes, home
      improvements or vacation expenses ( make no down payment)
     Single lump-sum credit: loan must be repaid in total on a specific date, usually
      within 30-60 days
              *Closed-end credit: pay back one-time loans in a specific time period and
      in payments of equal amounts

  2. Open-end credit
     Using credit card issued by department store, using bank credit card, using
      overdraft protection- examples
     Make any purchase you wish if you do not exceed your line of credit ( maximum
      dollar amount of credit the lender has made available to you)
     May have to pay interest( periodic charge for the use of credit)
     Many retailers use this
              *Open-end credit: loans are made on continuous basis and you are billed
      periodically for at least partial payment

  3. Credit Cards
     8 out of 10 U.S. households carry one or more credit cards
     2 out of 3 have at least one retail credit card
     1/3 of all credit card users generally pay off their balance in full each month-
      convenience users
     Borrowers: carry balances beyond the grace period and pay finance charges
     Cobranding: linking of credit card with a business trade name offering points of
      premiums towards purchase of product/ service
     Smart cards: credit cards, drivers license, health care id, frequent flier miles and
      telephone cards
     Debit cards: bank cards, ATM cards, cash cards and check cards
     Debit card- electronically subtracts from your account at the moment you buy
      goods/ services
   1. How to protect yourself from credit card Fraud
Protecting yourself against debit/credit card fraud
    Sign your new cards as soon as they arrive
    Treat your cards like money, Store them in a secure place
    Shred anything with your account number before throwing it away
    Don’t give your card number over the phone or online unless you initiate the
    Don’t write your card number on a postcard or the outside of an envelope
    Remember to for your card and receipt after a transaction, and double check to
       be sure it yours
    If your billing statement is incorrect or your credit cards are lost or stolen,
       notify your card issuers immediately
    If you don’t receive your billing statement, notify the company immediately
2 . How to Recognize it and Avoid it
      Use a Secure browser
      Keep records of your online transactions
      Review your monthly bank and credit card statements
      Read the policies of Web sits you visit, especially the disclosures about a
       site’s security, refund policies, and its privacy policy
      Keep your personal information private
      Give payment information only to businesses you know and trust
      Never give your password to anyone online even to your internet service
      Do not download files sent to you by strangers or click on hyperlinks from
       people you don’t know
3. Travel and Entertainment Cards
      Not really credit cards because monthly balance is due in full
      People think of them as credit cards because they don’t pay the moment they
       purchase goods or services
4. Home Equity Loans
      Home equity loan~ is based on the difference between the current market
       value of your home and the amount you still owe on your mortgage
           -You can borrow up to $100,000 or more on your home
   Set up as a revolving line of credit typically with a variable interest rate

   Revolving line of credit~ an arrangement whereby borrowings are permitted
    up to a specifies limit and for a stated period (usually 5-10 yrs)

   Use equity loans on major items: education, home improvements, medical


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