Question
Types of Credit Refer to the text and answer each question completely. credit and provide some examples. __ 2. What is closed-end credit and what are some ways people use it? __ 3. Explain the main difference between open-end and closed-end credit accounts. __ Complete the Venn Diagram below by listing two characteristics in each section comparing and contrasting credit cards and debit cards. Credit Card square Both
Answer
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Luna
Professional · Tutor for 6 years
Answer
1. Service credit refers to the ability to receive services and pay for them later. It is essentially a form of credit where the service is provided upfront, and the payment is deferred. Examples of service credit include utility services like electricity, water, and gas, where you use the service throughout the month and pay the bill afterward. Another example is a phone plan, where you might use the phone service all month and pay the bill at the end of the billing cycle.2. Closed-end credit is a type of credit that involves borrowing a fixed amount of money for a specific purpose and period. The borrower agrees to pay back the loan, plus interest and finance charges, in regular installments over the term of the loan. Closed-end credit is often used for purchasing big-ticket items such as cars (auto loans), homes (mortgages), or financing education (student loans).3. The main difference between open-end and closed-end credit accounts is that open-end credit (also known as revolving credit) allows the borrower to use credit up to a certain limit, make payments, and then use the credit again. It does not have a fixed number of payments, and the credit is available as long as the account remains in good standing. Examples include credit cards and lines of credit. Closed-end credit, on the other hand, is a one-time loan that the borrower pays back over a specified period with a set number of scheduled payments.Now, let's complete the Venn Diagram:Credit Card:- Allows borrowing up to a credit limit- Interest is charged on carried balancesBoth:- Can be used for purchases- Require personal identification for useDebit Card:- Withdraws money directly from a checking account- Typically does not charge interestFinal Answer:Credit Card Characteristics:- Allows borrowing up to a credit limit- Interest is charged on carried balancesBoth Credit and Debit Cards:- Can be used for purchases- Require personal identification for useDebit Card Characteristics:- Withdraws money directly from a checking account- Typically does not charge interest