Credit grantors generally issue three types of accounts. The basic terms of these account agreements are:
Revolving Agreement
(Typical Credit Card Account)
You may pay in full each month or choose to make a partial payment based on the outstanding balance. If you make a partial payment, you will be charged interest (a “finance charge”) on the portion of the balance you do not pay. Department stores, gas and oil companies, and banks typically issue credit cards based on a revolving credit plan.
Charge Agreement
You promise to pay the full balance each month, so you do not have to pay interest charges. Charge cards and charge accounts with local businesses often require repayment on this basis.
Installment Agreement
You sign a contract to repay a fixed amount of credit in equal payments over a specific period of time. Automobiles, furniture, and major appliances often are financed this way. Personal loans usually are paid back in installments, too.