3 Types of Credit:

Credit grantors generally issue three types of accounts. The basic terms of these account agreements are:

Revolving Agreement – A consumer pays in full each month or chooses to make a partial payment based on the outstanding balance. Department stores, gas and oil companies and banks typically issue credit cards based on a revolving credit plan.

Charge Agreement – A consumer promises to pay the full balance each month, so the borrower does not have to pay interest charges. Charge cards, not credit cards, and charge accounts with local businesses often require repayment on this basis.

Installment Agreement – A consumer signs a contract to repay a fixed amount of credit in equal payments over a specified period of time. Automobiles, furniture and major appliances often are financed this way. Personal loans usually are paid back in installments, too.

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