Deck 5: Consumer Credit: Credit Cards and Student Loans

Question 1

What does APR stand for?

A)Automatic pay raises
B)Auto payment rates
C)Annual percentage rate
D)Annual pay rate

Answer 1

Annual percentage rate

Question 2

Define grace period.

A)The amount of time you can't spend any money
B)The amount of time you have to pay your bill before finance charges are activated
C)The amount of time you have to pay your bill after finance charges have been made
D)The period in which you owe interest

Answer 2

The amount of time you have to pay your bill before finance charges are activated

Question 3

What is credit?

A)A type of card
B)The same as debit
C)A contractual agreement in which a borrower receives assets upon full payment over a period of time
D)A contractual agreement in which a borrower receives something of value now and agrees to repay the lender at some date in the future,generally with interest

Answer 3

A contractual agreement in which a borrower receives something of value now and agrees to repay the lender at some date in the future,generally with interest

Question 4

What are the 5 Cs of the credit decision?

A)Contacts,conditions,collateral,co-signer,and capacity
B)Character,capacity,collateral,capital,and conditions
C)Cost,contacts,conditions,collateral,and capital
D)None of the options are correct.

Question 5

If you buy a car with a secured credit loan,what will be the collateral?

A)The car
B)Your house
C)Your signature
D)Stock

Question 6

Which of the following best defines a secured credit card?

A)The credit card company allows you to borrow money based on your promise to repay
B)It requires a security deposit equalling the credit limit of the credit card
C)It is useful for those just starting to build credit
D)Requires a security deposit AND is useful for building credit

Question 7

What term best describes an unsecured loan where a guarantee of payment is based on your word?

A)Signature loan
B)Verbal loan
C)Margin loan
D)Credit loan

Question 8

Which is not part of the 5 Cs of the credit decision?

A)Character
B)Capacity
C)Conditions
D)Contacts

Question 9

Which of the following is not a reason that people apply for credit and end up getting into debt?

A)Overdraft protection
B)Getting enticed by low introductory rates
C)Not paying any more than the minimum payment
D)Strong temptation of instant gratification

Question 10

You have an $800 credit card limit.You buy a TV for $600.You then make a credit card payment of $200.How much more money can you spend with your credit card before going over the limit?

A)$200
B)$400
C)$600
D)$800

Question 11

According to the Federal Reserve Bank,in 2014,the average household credit card debt was ________.

A)$15,622
B)$5,765
C)$12,876
D)$20,143

Question 12

If your credit limit is $2,500 and you charge $1,500 and pay back $700,what is the maximum amount you can charge?

A)$500
B)$700
C)$1,500
D)$1,700

Question 13

Whether or not you have enough income minus expenses to pay a loan is which "C" of the 5 Cs?

A)Conditions
B)Collateral
C)Character
D)Capacity

Question 14

Which is true when trying to get a loan?

A)The higher the risk,the lower the rate
B)The higher the risk,the higher the rate
C)The lower the risk,the higher the rate
D)The risk and rate are unrelated.

Question 15

Which two Cs are the most important in the 5 Cs of credit?

A)Capital and collateral
B)Character and capacity
C)Capital and conditions
D)Character and conditions

Question 16

Which of the following are helpful in keeping your credit card rates and fees low?

A)Make every payment on time
B)Maintain a balance that is less than 30% of your credit line
C)Carefully read monthly statements for additional fees and read mail regarding adjustment notices
D)All of the options are correct.

Question 17

Which credit card is accepted worldwide?

A)Visa
B)MasterCard
C)Discover
D)Visa and MasterCard

Question 18

Which of the following are true regarding secured credit cards?

A)A secured credit card requires a security deposit equalling the credit limit of the card
B)If payments are not received,the credit card company can receive its money by cashing in the security deposit
C)Secured credit cards are ideal for those who are starting to build credit or who are trying to rebuild their credit history
D)All of the options are correct.

Question 19

What is your finance charge?

A)Interest on credit cards
B)Fees on credit cards
C)Total cost of borrowing on your card
D)Monthly rate

Question 20

In the event that you fail to make a payment,________ credit cards may take funds from your savings account.

A)unsecured
B)revolving
C)secured
D)platinum

Question 21

What is the average amount of a credit card's late fee?

A)$20
B)$26
C)$30
D)$36

Question 22

Interest rates on credit cards are

A)fixed.
B)variable.
C)fixed and/or variable.
D)none of the options are correct.

Question 23

Which of the following credit card fees is charged once a year just for having a card?

A)Cash advance fee
B)Return item fee
C)Annual fee
D)Balance transfer fee

Question 24

What are the repayment options for student loans?

A)Student loan consolidation and refinancing
B)Deferment
C)Forbearance
D)All of the options are correct.

Question 25

Which student loan does not accrue interest during school?

A)Parent Plus.
B)Unsubsidized.
C)Subsidized.
D)No student loans accrue interest during school.

Question 26

Which method of figuring your finance charge on your credit card is calculated by taking the payments or credits received during the current billing period and subtracting them from the balance at the end of the previous billing period?

A)Average daily balance method
B)Minimum finance charge
C)Credit limit
D)Adjusted balance method

Question 27

An example of a fee where you may incur a multiple charge is

A)a cash advance fee.
B)a late-payment fee.
C)an annual fee.
D)balance transfer fee.

Question 28

What is the downside to 0% deals?

A)The interest can be deferred until after the allotted time and then added to the bill if not paid.
B)There are no downsides to these kinds of deals.
C)If you don't pay it off,they add half the interest.
D)All of the options are correct.

Question 29

When receiving a student loan,the typical grace period before repayment must start is ________.

A)upon graduation
B)six months after graduation
C)six months after you are no longer a full-time student and/or complete your education
D)There is no grace period.

Question 30

Your previous balance is $100.You charge $100 more on January 2^nd and your month-end balance is $200.What method would cost the most with 12% APR?

A)Adjusted balance method
B)Average daily balance method
C)Minimum finance charge
D)Both the adjusted balance method and the average daily balance method

Question 31

Elijah is looking at student loans.Which one should he choose if he doesn't want to pay current interest?

A)Subsidized.
B)Unsubsidized.
C)Private.
D)All of these options would require him to pay interest.

Question 32

You used your clothing store credit card this month and your bill arrived in the mail 12 days ago.If you pay your bill today,this is referred to as a(n)

A)credit report.
B)grace period.
C)interest charge.
D)minimum charge.

Question 33

What is the difference between federal subsidized and unsubsidized loans?

A)Subsidized loans do not require repayment until 12 months after graduation,whereas unsubsidized loans require repayment immediately upon graduation.
B)With a subsidized loan,the interest on the loan is paid by the government if the student is enrolled in school at half-time status or greater; an unsubsidized loan requires the student to pay the interest on the loan that has accrued while still in school.
C)An unsubsidized loan allows students to borrow a greater amount of money than subsidized loans.
D)All of the options are correct.

Question 34

For a good credit score,never carry a balance of more than ________ of your credit limit on your credit card.

A)25%
B)30%
C)50%
D)60%

Question 35

What is a grace period?

A)Time to think and pray
B)The amount of time you have to pay your bill in full before finance charges are activated
C)The amount of time you have before you have to pay your bill
D)It refers to the first late payment for which no late fee is charged

Question 36

According to ________,you have 60 days after the statement date on your bill to report an error and not be held responsible for the error.

A)credit card regulations
B)The Fair Credit Billing Act
C)The FDA
D)The Banking & Finance Act

Question 37

If you have a subsidized loan,what is the best time to start repaying it?

A)After graduating
B)During school
C)Right after you get the loan
D)After you start graduate school

Question 38

What is the FAFSA application used for?

A)To make GPA comparisons
B)To determine your financial need
C)To find your credit score
D)To get personal information

Question 39

Calculate the cost per month to pay off a $1,000.00 personal loan over 2 years at 12% annual interest?

A)$52.86
B)$48.06
C)$56.09
D)$47.07

Question 40

Which of the following are steps that must be taken if there is an error on your credit card statement?

A)Contact the credit card company in writing within 60 days of the date on the statement that contains the error
B)Send the letter to the "billing inquiries" address on your statement
C)Include your name and account number,state the error,and include an explanation of why you think it is an error and the date of the error
D)All of the options are correct.

Question 41

What is the typical interest rate of rent-to-own outlets?

A)23.99%
B)99.99%
C)1,800%
D)2,000%

Question 42

The application used to determine financial need is called what?

A)FAFSA
B)SAFSA
C)AFFSA
D)FAASF

Question 43

Private student loans generally

A)have higher fees and interest rates.
B)have lower interest rates but higher fees.
C)have higher interest rates but lower fees.
D)have lower fees and interest rates.

Question 44

What is a usury law?

A)A state law that specifies the maximum legal interest rate at which loans can be made
B)A federal law that specifies the maximum legal interest rate at which loans can be made
C)A local law that specifies the maximum legal interest rate at which loans can be made
D)A state law that specifies the legal range of lending interest rates

Question 45

Predatory lending,lending money at an unreasonably high interest rate,includes all of the following except

A)title loans.
B)subsidized loans.
C)payday loans.
D)rent-to-own.

Question 46

What is an extension of a payday loan called?

A)Usury
B)Rollover
C)Extender
D)Extra day

Question 47

All of these are considered predatory lending except

A)payday loans from an institution such as check into cash.
B)title loans on your automobile.
C)rent-to-own.
D)community credit union home loan.

Question 48

What is an alternative to being taken advantage of through predatory lending?

A)Ask your bank for a personal loan
B)Obtain a cash advance on your credit card
C)Ask your employer for your check in advance
D)All of the options are correct.

Question 49

Which type of payment option postpones the repayment of principal for a certain time period?

A)Student loan refinancing
B)Deferment
C)Forbearance
D)Student loan refinancing AND forbearance

Question 50

What is predatory lending?

A)Lending money to borrowers at an extremely low interest rate
B)The act of lending money at an unreasonably high interest rate,making payment excessively difficult or impossible for the borrowers
C)Lending money to borrowers who are not at least 18 years of age
D)Offering a borrower the option to roll over or make an extension of their loan for an additional fee

Question 51

Which student loan is the best overall?

A)Subsidized federal loan
B)Private loan
C)Parent Plus loan
D)Unsubsidized federal loan

Question 52

When are you granted forbearance on a student loan?

A)When you pay it on time
B)When you do not have an approved reason for deferment,but are still unable to repay.
C)If you are granted deferment
D)If you declare bankruptcy

Question 53

Why can't lenders make interest rates as high as they want?

A)Usury laws
B)Rollover
C)Predatory lending
D)Fair Trading Act

Question 54

A roll over of a loan is ________.

A)an extension of a loan
B)when a bank lends you more money
C)when your grace period is up
D)a long-term loan

Question 55

What is the payment option for a student loan for which payments are postponed or reduced,but interest will accrue?

A)Consolidation and refinancing
B)Deferment
C)Forbearance
D)Amortize payments

Question 56

The act of lending money at an unreasonably high interest rate,thus making repayment excessively difficult or impossible for the borrowers,is the definition of

A)usury law.
B)predatory lending.
C)rollover.
D)interest rate spread.

Question 57

If you pay off a $3,600 loan in 12 equal payments over 1 year at 1% monthly simple interest,how much will your payments be each month?

A)$291.67
B)$319.86
C)$318.43
D)None of the options are correct.

Question 58

Which student loans typically have the lowest interest rate?

A)Federal student loans to students
B)Federal student loans to parents
C)Private student loans
D)All of the options typically have the same interest rates.

Question 59

Which is not referred to as predatory lending?

A)Payday loans
B)Check advance loans
C)Margin loans
D)Deferred deposit loans

Question 60

Would you rather borrow money using a subsidized loan or an unsubsidized loan and why?

A)Subsidized - The government pays interest
B)Unsubsidized - The government pays interest
C)Subsidized - The government doesn't pay interest
D)Unsubsidized - The government doesn't pay interest

Question 61

The difference between a secured credit card and an unsecured credit card is that a secured credit card is linked to a savings account where funds in the account may be claimed in the event that you fail to make payments.

Question 62

A total debt-to-income ratio of 30% or higher,including housing payments,makes you a high credit risk.

Question 63

One benefit of an unsubsidized loan,guaranteed by the U.S.Department of Education,is that the loan interest is paid for you while you are in school and maintain a minimum of a half-time status or greater.

Question 64

Students who are declared as independent students by the IRS or who are graduate students have higher loan limits.

Question 65

In general,students are not required to pay back student loans until the end of a grace period.

Question 66

Your use of credit cards can pay off in the form of free plane tickets,free hotel stays,or cash back and discounts.

Question 67

Arbitration is when you will not be held responsible for any charges on your account that are not yours if reported within 60 days of your statement.

Question 68

There are no advantages to the use of credit cards and they should be avoided at all cost.

Question 69

Credit card companies use a set of complex matrices to determine your limit,based on your credit score,net income,debt-to-income ratio,disposable income,and default risk.

Question 70

You should always look for an alternative to payday loans.

Question 71

The terms and conditions of a credit card are locked in once you obtain the card.

Question 72

Which type of costly loan offers cash for holding the title of a car as collateral?

A)Title loan
B)Payday loan
C)Car loan
D)Rent-to-own loan

Question 73

In addition to high interest,title loans usually include a number of fees that add up quickly.

Question 74

Approximately what percent interest do rent-to-own places charge?

A)1,500%
B)1,200%
C)1,800%
D)1,000%

Question 75

A student loan is another type of unsecured credit.

Question 76

Title loan lenders are required to show you their interest rates in annual percentages which can approach 300% depending upon the state.

Question 77

Lenders of payday loans and title loans work around what laws?

A)Usury laws
B)FAFSA laws
C)Loan laws
D)Lending laws

Question 78

The majority of Payday Loans and Title Loans are for a one time emergency situation.

Question 79

The terms of a predatory loan are crafted to make it easy to roll over the loan and keep you in a cycle of debt.