A B C D E F G H I J K L M N O P Q R S T U V W X Y Z
Quick Credit Lesson #34:
There are many people who want to eliminate credit card debt. They are not able to stop their outstanding balances. The debt keeps on increasing and they reach a point when they have no choice but to file for bankruptcy. There are three kinds of bankruptcy, Chapter 7, Chapter 11, and Chapter 13. Chapter 11 bankruptcy is designed for corporations that desire business reorganization. Therefore, only Chapters 7 and 13 will be outlined here as it pertains to consumers.
Balance Computation Methods - Credit card issuers assess finance charges by applying the APR to a balance. There are several methods for determining your balance. Two of the most frequently used balance methods are as follows:
Average Daily Balance Method: This balance is figured by adding the outstanding balance and deducting payments and credits for each day in the billing cycle, and then dividing by the number of days in the billing cycle. Some credit card issuers include new transactions in this calculation while others exclude new transactions.
Two-Cycle (or Double-Cycle) Average Daily Balance Method: This balance is calculated by taking the sum of the average daily balances for two billing cycles. The first balance is for the current billing cycle and the second balance is for the previous billing cycle.
Bankruptcy - A legal proceeding that may release a person from debt. This includes several version (or chapters): Chapter 7 - total liquidation of assets, Chapter 11 - business reorganization, Chapter 12 - farm debt, Chapter 13 - repayment plan.
Billing Cycle - The length of time between billing statements. A billing cycle is typically 30 days but because of weekends, holidays, and the variance in the number of days in a month, a billing cycle may be as short as 27 days and as long as 33 days.
Budget - A financial plan.
Business Card (Business Credit Card) - A bookkeeping and tax preparation tool for many businesses, these credit cards are generally issued to corporate executives or business owners. They make it easy to keep business expenses separate from personal charges.
