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Ch. 13 Banking, Debt, and Credit Issues, Key Terms - Coggle Diagram
Ch. 13 Banking, Debt, and Credit Issues
- With deregulation, money markets opened up and consumers had more choices because of increased competition
- Under the old check-processing system, paper checks took five days to go through the system and were handled more than 15 times. In the new online and electronic systems, checks can go through immediately.
- Four Main Kinds of financial institutions are commercial banks, credit unions, brokerage firms, and savings and loan associations.
- Financial management is a three-step process
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- A balance sheet reflects what is saved, owned, and owed. In recent years, Americans have been saving 4-5% of disposable income on average each year.
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- There are over 500,000 financial planners in the United States.
- Federal law sets procedures for correcting inaccurate information on credit reports.
- A credit score is a key factor in determining access to credit as well as the interest rate a person may be charged. The FICO score is the credit industry standard. FICO scores, which range from 300 to 850, allow lenders to rank loan applicants according to the likelihood they will repay on time.
- Online banking and online tax forms for the Internal Revenue Service offer convenience.
- Progressive taxes (e.g., income taxes) and regressive taxes (e.g., taxes on gasoline) have different impacts on the population. Tax avoidance is legal, but tax evasion is illegal.
- Consumer credit can be used for a variety of reasons, including financing education and buying luxury items. Financing education is an investment in human capital.
Key Terms
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credit score
includes all income, debt, and credit payment history as well as information on whether you have been sued or arrested or have filed for bankruptcy plus assets, length of employment, and length of living in one place
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emergency fund
three to six months of salary set aside as savings is recommended as a financial goal: should be kept in a liquid interest-bearing accounts
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FICO score
developed by the fire Fair Isaac is the score most widely used by lenders and is also the one you have to pay to see (the 3 credit reporting centers all provide a FICO score to lenders)
financial planner
looks at a person's or a family's total financial picture, helps that person or family define and prioritize goals, and then works out a plan to achieve those goals
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nexting
when people buy or attain something, their minds are already thinking of the next purchase or goal.
personal finance
term covers the spending, saving, investing, and protecting of financial resources
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Chapter 7 bankruptcy
known as "straight Liquidation chapter" because in returen for eliminating debts, the debtor agrees to turn over nonexempt assets and pay as much as possible to creditors
Chapter 13 bankruptcy
allows debtors to repay some of the debt they owe, and in return, they get to keep most of their property: usually , this type of debtor is a person with regular income
collateral
property such as a car, recreational vehicle, or boat used to secure a loan
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credit bureaus
consumer reporting agencies (CRAs). have files that contain information about your income, debt, and credit payment history as well as information on whether you have been sued or arrested or have filed for bankruptcy
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tax avoidance
a legal money managment strategy to reduce one's taxes throught such investments as tax-deferred individual retirement accounts (IRAs) or charitable donations, which are allowed under the tax code and should be properly documented
tax evasion
illegal because of methods used, like not paying taxes or not reporting all income
taxes
payments of the money to federal, state, and local governments
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Truth in Savings Act
requires financial institutions to reveal the annual percentage yield (the amount of interest earned on a yearly basis expressed as a percentage), fees charged, and information about rules regarding maintaining a minimum balance
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