Deck 5: Consumer Credit: Credit Cards and Student Loans

Question 1

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 these

Answer 1

All of these

Question 2

Which credit card is accepted worldwide?

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

Answer 2

Visa and MasterCard

Question 3

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

Answer 3

Overdraft protection

Question 4

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 5

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 6

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

Question 7

If your credit limit is $2,000 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) $1,200

Question 8

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 9

Which of the following are true regarding secured credit cards?

A) A secured credit card requires a security deposit equaling 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 these

Question 10

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

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

Question 11

According to the Federal Reserve Bank,in June 2010,what was the total amount of American consumer debt?

A) $2.4 trillion
B) $2.7 trillion
C) $1.8 trillion
D) $2.1 trillion

Question 12

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

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

Question 13

What does APR stand for?

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

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

You have an $800 credit card limit.You buy a TV for $600.You then make a credit card payment of $200 dollars.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 16

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 equaling 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 17

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.

Question 18

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 19

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 20

What are the 5 Cs of the credit decision?

A) Contacts,conditions,collateral,cosigner,and capacity
B) Character,capacity,collateral,capital,and conditions
C) Cost,contacts,conditions,collateral,and capital
D) None of these

Question 21

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 22

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 23

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 24

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 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 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 these

Question 27

Which of the following is an example of a reward for a credit card?

A) Airline miles
B) Hotel stays
C) Cash back
D) All of these

Question 28

Interest rates on credit cards are:

A) Fixed
B) Variable
C) Fixed and/or variable
D) None of these

Question 29

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 30

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) Fair Credit Billing Act
C) FDA
D) Banking & Finance Act

Question 31

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 these

Question 32

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 these

Question 33

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

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

Question 34

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 35

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 36

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
D) There is no grace period

Question 37

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 38

A fee that can be charged once a year by a credit card company for your use of the card is called what?

A) Cash advance fee
B) Late-payment fee
C) Annual fee
D) Balance transfer fee

Question 39

What are the repayment options for student loans?

A) Student loan consolidation and refinancing
B) Deferment
C) Forbearance
D) All of these

Question 40

When is the best time to start repaying student loans?

A) After graduating
B) During school
C) Right after you get the loan
D) All of these

Question 41

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 42

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 these

Question 43

What is an extension of a payday loan called?

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

Question 44

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 45

When are you granted forbearance on a loan?

A) When you pay it on time
B) Student loans are never deferred
C) If you are granted deferment
D) If you declare bankruptcy

Question 46

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 47

Which is not referred to as predatory lending?

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

Question 48

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 49

If you pay off a $3,500 loan in 12 equal payments over 1 year at 1% monthly interest,how much will your payments be each month?

A) $291.67
B) $310.97
C) $318.43
D) None of these

Question 50

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 51

The application used to determine financial need is called what?

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

Question 52

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 53

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

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

Question 54

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 or the options typically have the same interest rates

Question 55

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 56

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 57

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 58

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 59

Which student loan is the best overall?

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

Question 60

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 61

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 62

You should always look for an alternative to payday loans.

Question 63

The difference between a secured credit card and an unsecured credit card is that an unsecured 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 64

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

Question 65

The U.S.Department of Education guarantees subsidized and unsubsidized student loans.

Question 66

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 67

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

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

Question 68

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

Question 69

A student loan is another type of unsecured credit.

Question 70

Title loan lenders are required to show you their interest rates in annual percentages.

Question 71

Payday loans and title loans are required to disclose the APR in the Truth-in-Lending document.

Question 72

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

Question 73

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

Question 74

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

Question 75

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 76

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.

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 terms and conditions of a credit card can change after you obtain the card.

Question 79

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