Question

how does a penalty rate work on a credit card
what is the liability for a lost or stolen credit card
what are you actions and steps to dispute an error on a billing statement
distinguish between a single payment and an installment loan
what's the difference between a secured and an unsecured loan? please provide examples

Answer 1

Penalty rate:The credit card penalty rate, which is also known as the default rate, is the highest interest rate charged by a creditor or lender. The penalty rate is charged as a consequence for becoming delinquent on payments by 60 days or more, exceeding the credit limit, or having your credit card payment returned by your bank.

Credit card penalty rates are commonly around 29.99%, but can be higher or lower with some credit cards. The finance charge would be $20.54 on a $1,000 credit balance at a 29.99% penalty rate. Compare that to the $10.27 finance charge you'd pay on the same balance but at a much lower 15% interest rate and you'll see just how expensive the penalty rate can be.If your credit card issuer increases your interest rate to the penalty rate, you can have it lowered in six months as long as you stick to your credit card terms. That means make your payment on time, stay within your credit limit, and always have enough money in your checking account to cover your credit card payment so that your payment isn't returned.

Liability for losing credit card:If you lose your card or if it gets stolen, you must report the incident to the bank immediately in order to deactivate your card and prevent fraud. Liability fee on a lost or stolen card is payable on the expenses incurred during the period between the loss and your informing the bank.The sooner you report your stolen credit card, the less likely it is that you'll be responsible for any fraudulent charges.If you notice unauthorized charges made on your stolen credit card or stolen credit card number, contact your creditor quickly. Let them know whether your credit card has been stolen and provide the details of the fraudulent charges.

Follow up by sending a letter including the date the credit card was stolen, the date you reported the stolen credit card, and any unauthorized charges that have been made on your account. Make sure you send this letter via certified mail with return receipt requested to the creditor's address for correspondence. This address is often different from the payment processing address.

Therefore keep a copy of your credit card number and the phone number for its customer service department. Store it in a safe place where you can access it quickly to contact your creditor if your credit card is stolen.

Actions and steps to dispute an error on a billing statement:

1. Respond quickly. You have 60 days from the time the billing statement is sent to request a correction, so act quickly. ...
2. Your request needs to be in writing. ...
3. Your letter needs three specific pieces of information. ...
4. Then you wait. ...
5. Don't withhold payment! ...
6. Cover yourself.

Single payment and an installment loan:In general, a single payment loan is a shorter term loan that’s intended to be paid back in one lump sum on a date agreed upon by you and your creditor. The loan and your payment are typically not reported to the credit bureaus.

An installment loan is typically paid back in multiple payments on set dates agreed upon by you and your creditor prior to taking out the loan. It is sometimes called a “personal loan.” Depending on the creditor, an installment loan may or may not be credit reporting, so be sure to ask.

Secured and an unsecured loan:

There are two different types of loans: secured loans and unsecured loans. Understanding the differences between the two is an important step in achieving financial literacy, and can have a long-term effect on your financial health.

Basically, a secured loan requires borrowers to offer collateral, while an unsecured loan does not. This difference affects your interest rate, borrowing limit, and repayment terms.

Secured Loan:Secured loans are protected by an asset. The item purchased, such as a home or a car, can be used as collateral. The lender will hold the deed or title until the loan is paid in full. Other items can be used to back a loan too. This includes stocks, bonds, or personal property.secured loans are the most common way to borrow large amounts of money. A lender is only going to loan a large sum with a promise that it will be repaid. Putting your home on the line is a way to make sure you will do all you can to repay the loan.secured loans are not just for new purchases. secured loans can also be home equity loans or home equity lines of credit. These are based on the current value of your home minus the amount still owed. These loans use your home as collateral.

A secured loan means you are providing security that your loan will be repaid. The risk is if you can’t repay a secured loan, the lender can sell your collateral to pay off the loan.

Examples of Secured Loans:Mortgage,Auto Loan,Recreational Vehicle Loan etc

Unsecured Loan:Unsecured loans are the reverse of secured loans. They include things like credit cards, student loans, or personal (signature) loans. Lenders take more of a risk by making this loan, because there is no asset to recover in case of default. This is why the interest rates are higher. If you’re turned down for unsecured credit, you may still be able to obtain secured loans. But you must have something of value that can be used as collateral.

Examples of Unsecured Loans:Credit Cards,Personal (Signature) Loans,Personal Lines of Credit etc