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Chapter 8: Financial Services for Individuals and Households, Credit Cards…
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Credit Cards
Buying on credit means 'buy now pay later' and credit cards are designed to be used in this way. The benefit to the cardholder is that they do not need money available to pay for goods and services at the time of purchase
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The golden rule with credit cards is do not spend more than you can afford to repay at the end of each month
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Foreign Excahnge
When you visit countries outside the euro area you need to get the currency that is legal tender for that country, e.g. for a trip to the USA you would need US dollars
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- When converting euro to foreign currency, multiply € by the 'sell' bank rate
- When converting foreign currency into €, divide by the 'buy' bank rate
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Loans
Individuals and households may also receive loans from financial institutions. A number of different types of loans are available to individuals and households including:
- Short-term loans - which will be repaid within 1 year (e.g bank overdraft).
- Medium-term loans - which can ave a repayment term of 1 - 5 years
- Long-term loans - which will not be repaid for *more than 5 years** (e.g mortgage)
The amount of interest you pay on loans can vary enormously and it is worth shopping around the different institutions for the best rates and terms
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Charge cards
- A charge card is similar to a credit card since it involves buy now pay later. However, unlike a credit card, the account must be settled when the statement arrives. Since the bill must be cleared each month, no interest is charged to the customer. Instead the customer pays an annual fee to the card provider for use of the charge card
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