Question 1

Larry Arnold gets a direct loan of money to go on vacation with his family.He will repay the loan over the next twelve months.What type of credit did Larry use?
A)installment sales credit
B)installment cash credit
C)single lump sum credit
D)revolving credit
E)incidental credit

Accepted Answer

Larry used installment cash credit, which is a type of loan where the borrower receives a lump sum of money to be repaid over a set period of time through regular, scheduled payments.

Question 2

What should you do when you shop on-line using your credit card?
A)delete immediately all records of your transactions
B)use a secure browser
C)give out your private information to anyone who requests it on-line
D)make sure to open and download all files sent you by strangers
E)give your password to anyone who requests it

Accepted Answer

Using a secure browser is important when shopping online with your credit card as it enhances the security of your personal and financial information. A secure browser encrypts your data to keep it safe from malicious individuals who may try to intercept it. It is also important to ensure that the website you are shopping on uses HTTPS encryption and has a valid SSL certificate to further ensure the security of your transactions. Deleting all records of your transactions may not be necessary, as it may be useful to keep a record of your purchases, particularly for accounting or returns purposes. Giving out your private information to anyone who requests it online, downloading files from strangers, or giving out your password are all actions that should be avoided as they can compromise the security of your personal and financial information.

Question 3

Which federal law requires creditors to inform applicants of acceptance or rejection of their credit application within 30 days of receiving a completed application?
A)Truth in Lending Act
B)Fair Credit Reporting Act
C)Fair Credit Billing Act
D)Equal Credit Opportunity Act
E)Fair Debt Collection Practices Act

Accepted Answer

The Equal Credit Opportunity Act requires creditors to inform applicants of acceptance or rejection of their credit application within 30 days of receiving a completed application. The Truth in Lending Act requires disclosure of credit terms and costs, the Fair Credit Reporting Act regulates the collection and use of credit information, the Fair Credit Billing Act establishes procedures for billing disputes, and the Fair Debt Collection Practices Act regulates debt collection practices.

Question 4

Which one of the following is a disadvantage of using credit?
A)receiving advance notice of sales
B)ease of overspending
C)avoiding the necessity of carrying cash
D)ease of returning merchandise
E)having a record of all purchases

Accepted Answer

One disadvantage of using credit is the ease of overspending. When using credit, people often spend more money than they would with cash because they do not feel the immediate impact on their bank account. This can lead to financial struggles and debt.

Question 5

Jim Roy visits the doctor for his annual check-up which costs $85.He is billed for this at the end of the month.What type of credit did Jim use?
A)installment sales credit
B)installment cash credit
C)single lump sum credit
D)revolving credit
E)incidental credit

Accepted Answer

Incidental credit is a type of credit that arises as a byproduct of another transaction, such as a medical bill that is paid after the service is provided.

Question 6

Karen Price is 55 years old,divorced,and has worked at her current job for five years.She is interested in looking at her credit report.Which of the following pieces of information should she find in that report?
A)the address of the house she lived in as a child
B)a loan for furniture she paid off 12 years ago
C)the outstanding balance on the Visa card she has today
D)the names and addresses of her grown children
E)the fact that she was late paying her electric bill 8 years ago

Accepted Answer

Credit reports typically include current credit account information, such as the outstanding balance on credit cards.

Question 7

Gordon Carey uses his Visa card to purchase a new digital camera and lens.What type of credit did Gordon use?
A)installment sales credit
B)installment cash credit
C)single lump sum credit
D)revolving credit
E)incidental credit

Accepted Answer

Gordon used revolving credit, which allows him to borrow up to a set limit and pay back the borrowed amount over time, with interest. This is different from installment sales credit, where the borrower agrees to make a set number of payments until the entire amount borrowed is repaid. Gordon's use of his Visa card indicates that he has access to a revolving line of credit.

Question 8

Maryann Lawrence wants to get a loan in just her name.She knows the creditor cannot:
A)refuse her credit if she is creditworthy
B)consider income from her part-time job
C)consider the payment history of all her joint accounts
D)consider alimony payments she receives from her ex-husband
E)consider child support payments she receives from her ex-husband

Accepted Answer

Creditors cannot refuse credit if an individual is creditworthy, regardless of marital status or any other discriminatory factor. The other options (B, C, D, E) are all factors that creditors can consider when evaluating creditworthiness.

Question 9

Which of the following is most likely not a valid reason for using credit?
A)borrowing for a stay in a hospital because of appendicitis.
B)borrowing to purchase a car so that you can go to work full-time.
C)borrowing to buy a printer for your home office now because you know it will be twice as expensive in two years.
D)borrowing to pay for your expensive dinner and movie every week.
E)all of the above are valid reasons for using credit.

Accepted Answer

Borrowing money to pay for non-essential expenses such as an expensive meal or entertainment is not a valid reason to use credit. It is important to only use credit for necessary and important expenses that you can realistically pay back.

Question 10

Which consumer credit law prohibits abusive,deceptive,and unfair practices by debt collectors?
A)Fair Credit Billing Act
B)Fair Debt Collection Practices Act
C)Equal Credit Opportunity Act
D)Fair Credit Reporting Act
E)Truth in Lending Act

Accepted Answer

The Fair Debt Collection Practices Act (FDCPA) prohibits debt collectors from engaging in abusive, deceptive, and unfair practices when attempting to collect debts from consumers. The other laws listed address different aspects of consumer credit and are not specific to debt collection practices.

Question 11

Which federal law limits a cardholder's liability for unauthorized use of a card to $50?
A)Truth in Lending Act
B)Fair Credit Reporting Act
C)Fair Credit Billing Act
D)Equal Credit Opportunity Act
E)Fair Debt Collection Practices Act

Accepted Answer

The answer of Which federal law limits a cardholder's liability...

Question 12

Jennifer Garner purchases a sofa,love seat and reclining chair for her family room and will make payments of $65 per month for the next twenty-four months.What type of credit did Jennifer use?
A)installment sales credit
B)installment cash credit
C)single lump sum credit
D)revolving credit
E)incidental credit

Accepted Answer

Jennifer used installment sales credit, which allows her to make regular payments in fixed amounts over a specified period of time until the debt is fully paid off.

Question 13

Which federal law requires credit-reporting agencies to send the consumer's version of a disputed item to certain businesses and creditors?
A)Truth in Lending Act
B)Fair Credit Reporting Act
C)Fair Credit Billing Act
D)Equal Credit Opportunity Act
E)Fair Debt Collection Practices Act

Accepted Answer

The Fair Credit Reporting Act (FCRA) requires credit reporting agencies to provide the consumer's version of a disputed item to certain businesses and creditors. This helps ensure that the information being reported is accurate and up-to-date. The other options listed do not specifically address this requirement.

Question 14

Which federal law allows consumers to withhold payment for faulty or defective goods or services (within certain limitations)when purchased with a credit card?
A)Truth in Lending Act
B)Fair Credit Reporting Act
C)Fair Credit Billing Act
D)Equal Credit Opportunity Act
E)Fair Debt Collection Practices Act

Accepted Answer

The Fair Credit Billing Act allows consumers to dispute billing errors and withhold payment for faulty or defective goods or services (within certain limitations) when purchased with a credit card. The other laws listed do not specifically address this issue.

Question 15

Which federal law prohibits credit card issuers from sending unrequested cards?
A)Truth in Lending Act
B)Fair Credit Reporting Act
C)Fair Credit Billing Act
D)Equal Credit Opportunity Act
E)Fair Debt Collection Practices Act

Accepted Answer

The answer of Which federal law prohibits credit card issuers...

Question 16

Karen Price has determined that her net worth is $30,000,excluding her home.She owes $80,000 on her mortgage and $15,000 on a car loan.What is Karen's debt-to-equity ratio?
A)3.2
B)2.0
C)0.5
D)2.7
E)0.3

Accepted Answer

$15,000 / $30,000 = 0.5

Question 17

Jake Skinner purchases a big screen TV on credit and will repay the loan with one payment at the end of 90 days.What type of credit did Jake use?
A)installment sales credit
B)installment cash credit
C)single lump sum credit
D)revolving credit
E)incidental credit

Accepted Answer

Jake used single lump sum credit, which means he borrowed a fixed amount and will repay it in one payment at the end of a specific term.

Question 18

Affan Chawdry has monthly net income of $1,050.He has a house payment of $450 per month,a car loan with payments of $250 per month,a Visa card with payments of $50 per month,and a credit card with a local department store with payments of $100 per month.What is Affan's debt payments-to-income ratio?
A)2.63
B)1.24
C)0.81
D)0.38
E)0.50

Accepted Answer

The answer of Affan Chawdry has monthly net income of...

Question 19

Which one of the following is important to do to help avoid credit card fraud?
A)sign your card as soon as you get it
B)give out your credit card number over the phone
C)write your credit card number on the outside of envelopes
D)leave your credit card lying around anywhere
E)if your billing statement is incorrect,ignore it

Accepted Answer

Signing your card as soon as you get it ensures that if it falls into the wrong hands, the thief will not be able to sign it with their own name, making it easier to detect fraud.

Question 20

Which one of the following is an advantage of using credit?
A)potential bankruptcy
B)spending beyond your budget
C)funding an emergency expense
D)committing future income to pay for current purchases
E)incurring interest charges

Accepted Answer

Using credit allows you to fund unexpected or emergency expenses that you may not be able to pay for with cash on hand.

Quiz 6: Introduction to Consumer Credit

Larry Arnold gets a direct loan of money to go on vacation with his family.He will repay the loan over the next twelve months.What type of credit did Larry use?

What should you do when you shop on-line using your credit card?

Which federal law requires creditors to inform applicants of acceptance or rejection of their credit application within 30 days of receiving a completed application?

Which one of the following is a disadvantage of using credit?

Jim Roy visits the doctor for his annual check-up which costs $85.He is billed for this at the end of the month.What type of credit did Jim use?

Karen Price is 55 years old,divorced,and has worked at her current job for five years.She is interested in looking at her credit report.Which of the following pieces of information should she find in that report?

Gordon Carey uses his Visa card to purchase a new digital camera and lens.What type of credit did Gordon use?

Maryann Lawrence wants to get a loan in just her name.She knows the creditor cannot:

Which of the following is most likely not a valid reason for using credit?

Which consumer credit law prohibits abusive,deceptive,and unfair practices by debt collectors?

Which federal law limits a cardholder's liability for unauthorized use of a card to $50?

Jennifer Garner purchases a sofa,love seat and reclining chair for her family room and will make payments of $65 per month for the next twenty-four months.What type of credit did Jennifer use?

Which federal law requires credit-reporting agencies to send the consumer's version of a disputed item to certain businesses and creditors?

Which federal law allows consumers to withhold payment for faulty or defective goods or services (within certain limitations) when purchased with a credit card?

Which federal law prohibits credit card issuers from sending unrequested cards?

Karen Price has determined that her net worth is $30,000,excluding her home.She owes $80,000 on her mortgage and $15,000 on a car loan.What is Karen's debt-to-equity ratio?

Jake Skinner purchases a big screen TV on credit and will repay the loan with one payment at the end of 90 days.What type of credit did Jake use?

Affan Chawdry has monthly net income of $1,050.He has a house payment of $450 per month,a car loan with payments of $250 per month,a Visa card with payments of $50 per month,and a credit card with a local department store with payments of $100 per month.What is Affan's debt payments-to-income ratio?

Which one of the following is important to do to help avoid credit card fraud?

Which one of the following is an advantage of using credit?