Deck 6: Using Credit

Question 1

Always paying cash is helpful in establishing a high level of creditworthiness.

Answer 1

False

Question 2

Credit should not consistently be used for nondurable goods.

Answer 2

True

Question 3

A debt safety ratio of 25% might be a signal of financial trouble ahead.

Answer 3

True

Question 4

Using more than 20 percent of one's take-home income to pay off consumer debt is one of the signs that one may be headed for serious credit problems.

Question 5

The purpose of a credit report is to evaluate the kind of risk you pose to the lender.

Question 6

A good rule to remember when considering the use of credit is that the product purchased on credit should outlive the amount of time it takes to pay it off.

Question 7

Paying only the minimum payment each time on a credit card usually enables one to pay off the balance fairly quickly.

Question 8

Paying a loan off much quicker than scheduled is one way to build a good credit rating.

Question 9

Having a checking account tells a creditor that you have some experience in managing your own funds.

Question 10

Having arranged and fully repaid a small loan should help improve creditworthiness.

Question 11

The most common form of open account credit is the debit card.

Question 12

Saving is the preferred way to provide for financial emergencies.

Question 13

A debt safety ratio of 15% would generally be a signal of financial trouble ahead.

Question 14

It is safe,and often required,to give your Social Security number as a form of identification when using a credit card.

Question 15

One can be overusing credit even though he can afford to make minimum monthly payments on time.

Question 16

The most common forms of open account credit are bank credit cards and retail charge cards.

Question 17

Never adding up all your bills is one of the signs that you may be headed for serious credit problems.

Question 18

Credit reports are routinely used to predict creditworthiness.

Question 19

Credit cards with very low minimum payment requirements are in the consumer's best interest.

Question 20

Using credit is the ideal way to provide for financial emergencies.

Question 21

Generally speaking,the interest rates on credit cards are lower than any other form of credit.

Question 22

A credit limit refers to the maximum amount the cardholder can owe the issuer at any point in time.

Question 23

The required monthly payment on an open account will be the smaller of a minimum dollar amount or a specified percentage of the balance.

Question 24

College students without verifiable income cannot be issued credit cards.

Question 25

Most organizations that issue credit cards have basically the same qualifications for card applicants.

Question 26

Advantages of balance transfers can include lower interest rates and the convenience of consolidation.

Question 27

The key to creditworthiness is to keep your debt safety ratio as high as possible.

Question 28

Your account with the utility company is an example of open account credit.

Question 29

Being late on credit payments only 2-3 times per year may label you a "late payer" in your credit file.

Question 30

Credit reports on individual borrowers are issued by credit bureaus.

Question 31

Rebate credit cards work best for those who use the rebates,charge a lot,and do not carry high monthly balances.

Question 32

Credit card statements must be sent out at least 21 days before the due date.

Question 33

Bank credit card purchases always begin accruing interest charges immediately.

Question 34

Interest rates on credit cards tend to be lower than most other forms of consumer credit.

Question 35

Credit card payments received the next business day after a holiday or weekend due date are considered on time.

Question 36

Credit reports on individual borrowers are issued by credit card issuers.

Question 37

Open account credit is a form of credit extended to a consumer in advance of any transaction.

Question 38

Credit cards often have penalties for late payment and for exceeding credit limits.

Question 39

Auto loans are an example of open account credit since you can add to the debt when you purchase another vehicle.

Question 40

Bank credit cards represent the most common kind of open account credit.

Question 41

Revolving credit lines are often accessed by writing checks.

Question 42

For a fee,credit bureaus can provide credit scores for prospective borrowers.

Question 43

The proceeds of a home equity loan can be used for just about any purpose,and the interest paid is usually tax deductible.

Question 44

Unsecured lines of credit are easy to use and often use some form of collateral as default protection.

Question 45

Unsecured lines of credit provide tax advantages if you itemize deductions.

Question 46

As a rule,the smaller the bank or S&L,the more likely it is to charge an annual fee for its credit cards.

Question 47

The most common method used by lenders to apply finance charges to credit cards is the average daily balance including new purchases method.

Question 48

Prepaid cards are referred to as electronic wallets.

Question 49

For someone with a good credit rating,lenders will typically lend up to 100% of equity in a home using a home equity credit line.

Question 50

Home equity loans are one of the least expensive forms of consumer credit.

Question 51

Debit cards look like credit cards,but they work like checks.

Question 52

Credit bureaus provide information about prospective borrowers.

Question 53

Credit card users can often avoid finance charges entirely by paying their total balances by the stated due date.

Question 54

Secured credit cards require that the cardholder put up collateral in order to get the card.

Question 55

With prepaid cards,there is no established line of credit.

Question 56

Due to the Credit Card Act of 2009,finance charges can no longer be calculated using the double-cycle billing approach.

Question 57

Credit bureau files often include information such as political and religious affiliations in addition to financial information.

Question 58

One can and should check his credit bureau file regularly.

Question 59

Student credit cards are structured much differently than regular credit cards.

Question 60

One can lose his home if he does not repay his home equity line of credit.

Question 61

Families who have a source of income and who want to retain their assets above the protected amount would select Chapter 13 rather than Chapter 7 bankruptcy.

Question 62

Generally,finance charges are computed only on the unpaid balance from previous months' purchases.

Question 63

The intent of the Wage Earner Plan is to provide an alternative to straight bankruptcy.

Question 64

The more credit cards one has,the better one's credit score.

Question 65

The majority of persons filing bankruptcy file Chapter 7 bankruptcy.

Question 66

The Wage Earner Plan requires debtors to give up most of their assets.

Question 67

The most common method of computing finance charges on a credit card is the average daily balance method including new purchases.

Question 68

A Chapter 13 bankruptcy filing results in the discharge of most of your debts.

Question 69

A credit card user's credit rating will be harmed if she pays only the minimum monthly payment on a credit card.

Question 70

Before filing for bankruptcy,debtors should consider seeking the help of a credit counselor.

Question 71

It is not a good idea to use credit

A)for convenience.
B)for durable goods.
C)for consumable items.
D)to partially finance investments.
E)to improve one's credit rating.

Question 72

The amount of finance charges one pays on a credit card depends only on APR and the amount one charges.

Question 73

____ would be an acceptable use of credit.

A)Purchase of a house
B)A financial emergency
C)Shopping convenience
D)Investing
E)All of these

Question 74

If you initiated the telephone call,it is okay to give your credit card account number when ordering/purchasing from major catalog houses,airlines,hotels,and so on.

Question 75

Credit scoring systems are often used by lenders to determine your creditworthiness.

Question 76

​If your credit card company increases your interest rate,the new rate can only be applied to new charges,not to preexisting balances.

Question 77

Filing Chapter 7 bankruptcy eliminates one's obligation to pay past-due alimony and child support payments.

Question 78

It is not a good idea to use credit to

A)buy a home.
B)live beyond one's means.
C)spread payments within a budget.
D)purchase expensive items.
E)replace a check for small items.

Question 79

After the Credit Card Act of 2009 was passed,late payments dropped but defaults increased.

Question 80

Chapter 7 bankruptcies can remain in your credit file for up to 10 years.