Deck 7: Credit Cards and Consumer Loans

Question 1

An unsecured personal loan is a line of credit available on an as-needed basis.

Answer 1

True

Question 2

The cost of credit on a yearly basis as a percentage rate is called the APR.

Answer 2

True

Question 3

Service credit normally carries no interest.

Answer 3

True

Question 4

A bank credit card account is an open-end account at a financial institution that allows the holder to make purchases almost anywhere.

Question 5

Visa and MasterCard are the most commonly recognized bank card names as well as the actual lenders.

Question 6

The credit limit on a credit card restricts the total cumulative amount of charges that can be made by the borrower over the borrower's lifetime.

Question 7

Consumer credit is non-business debt used by consumers for expenditures including home mortgages.

Question 8

The balance of travel and entertainment (T&E) cards must be paid in 60 days.

Question 9

The amount owed on a debt is the principal.

Question 10

Making a payment on one credit card with a cash advance from another is called a balance transfer.

Question 11

A retail credit card allows a customer to make purchases on credit at any of the outlets of a particular retailer or retail chain.

Question 12

Service credit is granted to consumers by public utilities,physicians,dentists,and other service providers that do not require full payment when services are rendered.

Question 13

With open-end credit,credit is extended in advance of any transaction,and the borrower must reapply each time credit is desired.

Question 14

An unsecured personal loan can be accessed by writing special checks.

Question 15

A borrower who has failed to make a payment of principal or interest when due or meet any other requirement of a credit agreement is said to be in foreclosure.

Question 16

For an open-end credit account,a credit limit is set by the lender and represents the maximum outstanding debt allowed on the account.

Question 17

A credit card holder is in default when he or she fails to meet any requirement of a credit agreement.

Question 18

All types of open-end credit accounts allow multiple uses without reapplication,but some require that the entire balance be repaid each month.

Question 19

The entire balance charged on travel and entertainment cards must be repaid within 30 days.

Question 20

An installment loan is also called open-end credit.

Question 21

The Truth in Lending Act limits a cardholder's credit card liability for lost or stolen credit cards.

Question 22

If you cut up your credit card,the account is effectively closed.

Question 23

Obtaining money via a credit card cash advance is a low-cost alternative if you need a loan.

Question 24

Annual and transaction fees are not required to be included in the APR calculation for a credit card because they cannot be known in advance.

Question 25

Affinity cards are a source of revenue for the sponsoring organization.

Question 26

As a gesture of goodwill,most companies waive the $50 fee for unauthorized use of credit cards when notified promptly of the unauthorized use.

Question 27

Affinity cards are prestige bank cards with the logo of a sponsoring organization imprinted on the face of the card.

Question 28

If you notify the card issuer within two days of a loss or theft,you are not legally responsible for any fraudulent usage of the card.

Question 29

A credit card holder is not responsible for any fraudulent usage that occurs after he or she notifies the issuer of the loss.

Question 30

The interest rates on cash advances using a credit card are usually higher than the rates for purchases.

Question 31

Most homeowner's and renter's insurance policies typically pay for the $50 fee you might have to pay for unauthorized use of a lost or stolen credit card.

Question 32

A preapproved credit card offer means that you will be granted credit,but the credit card debt limit and APR will be determined after you apply for an account.

Question 33

The interest rate on variable-rate credit cards is usually tied to some form of prime interest rate.

Question 34

A secured credit card is backed by collateral in the form of a savings account opened at the financial institution that issues the card,and this savings balance can be withdrawn at any time.

Question 35

The penalty APR is a measure of the number of credit card users that pay only the minimum each month.

Question 36

Credit card companies can change the rules of the account if they give the borrower 45 days notice of the change.

Question 37

New credit card accounts sometimes come with a low introductory rate for the first few months.

Question 38

Introductory rates are also known as teaser rates.

Question 39

A penalty APR is a high interest rate that is assessed whenever a borrower fails to uphold certain rules of the account.

Question 40

A retail credit card allows the holder to make purchases at numerous businesses.

Question 41

The billing date is the last day of the month for which any transactions are reported on the statement.

Question 42

Your goal should be to use credit cards in a manner that avoids all fees,including finance charges.This means paying at least the minimum payment every month.

Question 43

Whenever you make more than the minimum payment on your credit card account,the lender must apply any excess above the minimum payment to the portion of the card debt that carries the highest APR.

Question 44

The date on which a credit cardholder makes a purchase or receives a credit is known as the transaction date.

Question 45

If you make the minimum payment on a credit card account,it will take six years or more to pay off the balance even if the card is never used again.

Question 46

Wise users of credit have a no-annual-fee card for convenience purchases and a low-APR card for purchases where they carry a balance.

Question 47

Companies that issue credit cards must disclose the APR but not the periodic rate on the monthly billing statement.

Question 48

Credit life insurance is generally a good buy for the borrower.

Question 49

The FCBA helps people who wish to dispute billing errors on revolving credit accounts.

Question 50

The due date is the last day of the month for which any transactions are reported on the statement.

Question 51

The Fair Credit Billing Act limits a cardholder's credit card liability for lost or stolen credit cards.

Question 52

Another term for a secured credit card is a collateralized credit card.

Question 53

Credit cards with a grace period allow the credit cardholder to pay no finance charges if they pay the balance in full every month.

Question 54

Late-payment fees of $25 are often applied when the borrower fails to make a payment by the billing date.

Question 55

Federal law states that credit card bills must be mailed to cardholders at least 10 days before payments are due.

Question 56

Credit life and credit disability insurance are fairly priced.

Question 57

Making the minimum payment on a credit card that you continue to use will bring your balance down over time.

Question 58

The time period between billing dates is referred to as the billing cycle.

Question 59

The grace period is the time period between the posting date of a transaction and the billing date.

Question 60

Credit card bills only need to inform consumers of the method used to compute the finance charges.

Question 61

With a conditional sales contract,the title passes to the buyer when the document is signed.

Question 62

You must make a billing error complaint within 60 days after the transaction has posted.

Question 63

Three methods are employed to calculate interest on single-payment loans: the declining balance method,the discount method,and the add-on interest method.

Question 64

Installment purchase agreements are loans in which the title does not pass to the buyer until the last installment payment has been paid.

Question 65

Chargebacks are the same as cash discounts.

Question 66

By making the minimum payment on a typical credit card,a borrower will have the debt paid off in about two years.

Question 67

Consumer installment loans typically are made with a fixed interest rate.

Question 68

Repossession clauses protect the borrower's interest.

Question 69

A fixed interest rate means that the rate will not change over the life of the loan.

Question 70

Almost all installment loan contracts contain an acceleration clause stating that after a specific number of payments are unpaid,the loan is in default,and all remaining installments are due and payable on demand of the creditor.

Question 71

A lien is a legal right to seize and dispose of (usually sell) property for payment of a claim.

Question 72

Repossession of property is much easier for the lender with a conditional sales contract than with an installment purchase agreement.

Question 73

An installment purchase agreement provides more protection to the buyer than a conditional sales contract.

Question 74

The Fair Credit Billing Act permit a chargeback when there is a goods and service dispute over a purchase made with a credit card that cannot be resolved with the merchant.

Question 75

If your credit card issuer allows you to "skip a payment," interest will not be charged for the month.

Question 76

When a person makes a purchase on credit with no cash passing between the borrower and the lender,this is called a cash loan.

Question 77

During the period that a billing dispute is being investigated,creditors cannot send dunning letters.

Question 78

A conditional sales contract is also known as a financing lease.

Question 79

The only way to obtain a secured loan is to put up collateral.

Question 80

All mandatory charges to be paid by the borrower must be included in the finance charge.