AAEC 2104 Lecture Notes - Lecture 12: Balance Transfer, Cash Advance, Revolving Credit
26 Mar 2018
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Credit: buying something today with the obligation to pay later. Auto-loan, credit cards, vacation loans, student loans etc. Variable payback minimum payment to full amount. Credit card: visa, mastercard, store credit cards, etc. Open accounts at stores: drug stores, hardware stores. Operating lines of credit (ag and business: for purchasing operating inputs. Fixed rates on credit cards may change over time: need 45 days notice from company. Variable rate: variable rates usually tied to an index (prime, libor, example: variable rate=prime rate + 2. 99, variable rate may change each month. Teaser rates: short-term low rates as low as 0% apr, after stated term, rate increases. National average credit card apr = 17% - 19% Average daily balance method: most common method, add up each day"s balance, divide by number of days, uses the previous statement"s ending balance. Previous balance method: higher interest charges. Adjusted balance method: subtracts any payments from previous balance, lower interest charges than previous balance method.
