Loan Rates, Credit, Personal Debt, Spending Habits, and Banking Industry Practices (2004)
Consumer debt can be defined as 'money, goods or services provided to an
individual in lieu of payment.' Common forms of consumer credit include
credit cards, store cards, motor (auto) finance, personal loans
(installment loans), consumer lines of credit, retail loans (retail
installment loans) and mortgages. This is a broad definition of consumer
credit and corresponds with the Bank of England's definition of
"Lending to individuals". Given the size and nature of the mortgage
market, many observers classify mortgage lending as a separate category
of personal borrowing, and consequently residential mortgages are
excluded from some definitions of consumer credit - such as the one
adopted by the Federal Reserve in the US.
The cost of credit is
the additional amount, over and above the amount borrowed, that the
borrower has to pay. It includes interest, arrangement fees and any
other charges. Some costs are mandatory, required by the lender as an
integral part of the credit agreement. Other costs, such as those for
credit insurance, may be optional. The borrower chooses whether or not
they are included as part of the agreement.
Interest and other
charges are presented in a variety of different ways, but under many
legislative regimes lenders are required to quote all mandatory charges
in the form of an annual percentage rate (APR). The goal of the APR
calculation is to promote 'truth in lending', to give potential
borrowers a clear measure of the true cost of borrowing and to allow a
comparison to be made between competing products. The APR is derived
from the pattern of advances and repayments made during the agreement.
Optional charges are not included in the APR calculation. So if there is
a tick box on an application form asking if the consumer would like to
take out payment insurance, then insurance costs will not be included in
the APR calculation (Finlay 2009).
http://en.wikipedia.org/wiki/Consumer...
To
be able to provide home buyers and builders with the funds needed,
banks must compete for deposits. The phenomenon of disintermediation had
to dollars moving from savings accounts and into direct market
instruments such as U.S. Department of Treasury obligations, agency
securities, and corporate debt. One of the greatest factors in recent
years in the movement of deposits was the tremendous growth of money
market funds whose higher interest rates attracted consumer
deposits.[16]
To compete for deposits, US savings institutions
offer many different types of plans:[16] Passbook or ordinary
deposit accounts — permit any amount to be added to or withdrawn from
the account at any time. NOW and Super NOW accounts — function like
checking accounts but earn interest. A minimum balance may be required
on Super NOW accounts. Money market accounts — carry a monthly limit
of preauthorized transfers to other accounts or persons and may require
a minimum or average balance. Certificate accounts — subject to
loss of some or all interest on withdrawals before maturity. Notice
accounts — the equivalent of certificate accounts with an indefinite
term. Savers agree to notify the institution a specified time before
withdrawal. Individual retirement accounts (IRAs) and Keogh plans — a
form of retirement savings in which the funds deposited and interest
earned are exempt from income tax until after withdrawal. Checking
accounts — offered by some institutions under definite restrictions.
All withdrawals and deposits are completely the sole decision and
responsibility of the account owner unless the parent or guardian is
required to do otherwise for legal reasons. Club accounts and other
savings accounts — designed to help people save regularly to meet
certain goals.
http://en.wikipedia.org/wiki/Banking_...
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