We use cookies to improve security, personalize the user experience,
enhance our marketing activities (including cooperating with our marketing partners) and for other
business use.
Click "here" to read our Cookie Policy.
By clicking "Accept" you agree to the use of cookies. Read less
What is an Open End Credit Plan? A Comprehensive Legal Overview
Definition & Meaning
An open end credit plan is a type of credit arrangement that allows for repeated borrowing and repayment. Under this plan, the creditor expects that the borrower will make multiple transactions over time. The terms of the credit, including how interest is calculated on the unpaid balance, are clearly defined. Even if the creditor checks the borrower's credit information periodically, the plan remains classified as an open end credit plan.
Table of content
Legal Use & context
Open end credit plans are commonly used in various legal contexts, particularly in consumer finance and lending practices. They are often associated with credit cards and lines of credit, where users can borrow up to a certain limit and pay back the amount over time. Legal forms related to open end credit plans may include credit agreements and disclosures, which individuals can manage using templates from US Legal Forms.
Key legal elements
Real-world examples
Here are a couple of examples of abatement:
Example 1: A credit card issued by a bank allows the cardholder to make purchases up to a specified limit. The cardholder can carry a balance from month to month, accruing interest on the unpaid amount.
Example 2: A line of credit from a financial institution enables a business to borrow funds as needed, up to an agreed limit, and pay interest only on the amount borrowed (hypothetical example).
Relevant laws & statutes
Open end credit plans are regulated under the Truth in Lending Act (TILA), which requires lenders to disclose key terms and costs associated with credit. This includes the Annual Percentage Rate (APR) and any fees that may apply.
State-by-state differences
State
Key Differences
California
Requires additional disclosures for credit card agreements.
Texas
Limits the amount of interest that can be charged on open end credit plans.
This is not a complete list. State laws vary, and users should consult local rules for specific guidance.
Comparison with related terms
Term
Definition
Key Differences
Closed End Credit
A loan for a specific amount that is paid back in fixed installments.
Closed end credit does not allow for repeated borrowing; it is a one-time loan.
Revolving Credit
A type of credit that allows the borrower to use and repay funds repeatedly.
Open end credit is a broader category that includes revolving credit, but not all open end plans are revolving.
Common misunderstandings
What to do if this term applies to you
If you are considering an open end credit plan, review the terms carefully, including interest rates and fees. Make sure you understand how the finance charges are calculated on your balance. You can explore US Legal Forms for templates that can help you draft or review credit agreements. If your situation is complex, consulting a legal professional may be beneficial.
Find the legal form that fits your case
Browse our library of 85,000+ state-specific legal templates.