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Types of Credit
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Closed End or Installment Credit
Loans, merchandise and services are paid for this way. Fixed amount of $$, fixed payments, interest, fixed period of time.
Orthodontia, medical services
Furniture, appliances, electronics
Loans: autos, houses, school, personal, etc.
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Secured vs. Unsecured Loans Secured (collateral such as auto, house, etc.)
Unsecured (no collateral)
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Revolving Credit
Many items can be bought using this plan as long as you don’t go over your limit and you make regular payments.
May be able to carry a balance, however, interest will be charged.
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Charge card (30 day account)
The entire account balance must be paid in full when billed.
i.e. American Express
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Credit Card
Retail cards (Target, Nordstrom, REI, GAP, etc.)
Travel/Entertainment (gas, Diner’s Club)
Bank Credit Card General Purpose cards accepted multiple places and issued through a financial institution (VISA, MasterCard).
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Affinity CardsA financial institution plus non-financial group
join together to offer a card. Schools, sporting teams, airlines, non-profits,
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Co-Branded Cards
Financial institution plus a retail company.
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Stored Value CardsA type of electronic bank debit card. Stored-value cards have a specific dollar value
programmed into them. Banks provide these cards as a service for
customers who cannot open checking or other deposit accounts.
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In total, American consumers owe:
$11.62 trillion in debt An increase of 3.4% from last year $880.3 billion in credit card debt $8.05 trillion in mortgages $1,122.7 billion in student loans
An increase of 10.5% from last year
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Credit Card Debt
Credit card debt is the third largest source of household indebtedness. Only the mortgage and student loan debt markets are larger.
46.7 % of households had a credit card balance on December 30, 2012
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Is lower credit card debt good for the economy?
Credit card debt is currently holding fairly steady – but whether or not that’s a good thing is up for debate.
Turn to your partner and discuss – what are the pros and cons of this?