Question 1

With closed-end credit, generally the seller holds the title to the merchandise until the payments have been completed.

Accepted Answer

Closed-end credit, also known as installment credit, is a type of loan where the borrower receives a fixed amount of money which is paid back in fixed monthly installments over a specified time period. The lender holds title to the merchandise or property until the loan is paid in full. This is different from open-end credit, such as credit cards, where the borrower can continuously borrow up to a certain limit without having to apply for a new loan each time.

Question 2

Installment cash credit is a direct loan of money for personal purposes, home improvements, or vacation expenses.

Accepted Answer

Installment cash credit is a type of loan that provides a lump sum of money to the borrower that must be repaid in fixed installments over a predetermined period of time. It can be used for a variety of personal expenses such as home improvements, medical bills, or vacation expenses.

Question 3

Consumer credit dates back to colonial times.

Accepted Answer

Consumer credit has been around in some form since colonial times in America when farmers would use credit to purchase tools and goods to improve their farms.

Question 4

Credit when effectively used, can help you have more and enjoy more.

Accepted Answer

When used effectively, credit can help you make big purchases and invest in opportunities that can improve your quality of life, such as buying a home or starting a business. It can also help you earn rewards and build a strong credit history. However, if credit is misused or overspent, it can lead to debt and financial problems.

Question 5

Closed-end in credit is used for a specific purpose and involves a specified amount.

Accepted Answer

Closed-end credit refers to a specific loan amount provided by a lender to a borrower for a particular purpose. This type of credit is usually repaid in installments over a fixed period of time. Examples of closed-end credit include car loans, mortgages, and personal loans.

Question 6

Consumer credit is based on trust in people's ability and willingness to pay bills when due.

Accepted Answer

Consumer credit is indeed based on trust that the borrower will be able and willing to repay the loan as agreed upon. Lenders will consider factors such as credit history, income, and employment status to determine the borrower's likelihood of being able to repay the loan.

Question 7

Although credit allows more immediate satisfaction of needs and desires, it does not increase total purchasing power.

Accepted Answer

Credit may provide a temporary increase in purchasing power, but it does not increase the overall amount of money and resources available to an individual. In fact, if not managed responsibly, credit can ultimately decrease purchasing power due to accumulating debt and interest payments.

Question 8

Most consumers have only one choice in financing current purchases.

Accepted Answer

Most consumers have multiple options for financing current purchases, such as using a credit card, taking out a loan, or utilizing store financing options.

Question 9

With an open-end credit, you pay back one-time loans in a specified period of time in equal amounts.

Accepted Answer

With an open-end credit, there is no specified period of time to pay back loans and you can borrow money up to a predetermined credit limit without having to reapply each time. The repayment terms for each individual loan may vary.

Question 10

Credit is an arrangement to receive cash, goods, or services now and pay for them in the future.

Accepted Answer

Credit allows individuals or businesses to obtain funds or goods now and pay for them later, often with interest.

Question 11

"Shopaholics" and young adults are most vulnerable to misusing credit.

Accepted Answer

Shopaholics and young adults are often targeted by credit card companies and are more likely to fall into debt due to overspending and not fully understanding credit card terms and interest rates.

Question 12

The aging of the baby boom generation has added to the growth of consumer credit.

Accepted Answer

As the baby boom generation has aged, they have continued to spend money and require financial assistance, contributing to the growth of consumer credit.

Question 13

Consumer credit refers to the use of credit for personal needs (except a home mortgage) by individuals.

Accepted Answer

Consumer credit is defined as credit used by individuals for personal needs such as purchasing a car, paying for education, or making household purchases. It does not include credit used for a home mortgage.

Question 14

It is safer to use credit, since charge accounts and credit cards let you shop and travel without carrying large amounts of cash.

Accepted Answer

Using credit allows you to make purchases without carrying a lot of cash with you, reducing the risk of theft or loss. Credit cards and charge accounts also offer fraud protection, so you are not liable for unauthorized purchases.

Question 15

With closed-end credit, loans are made on a continuous basis and you make at least a partial payment each billing period.

Accepted Answer

Closed-end credit refers to loans that are taken out for a specific purpose, with a fixed repayment term and schedule. Examples of closed-end credit include mortgages and car loans. Payments are typically made in fixed amounts over a set period of time, and once the loan is paid off, the account is closed. This is different from open-end credit, such as credit cards, where loans are made on a continuous basis and payments can vary from month to month.

Question 16

Perhaps the greatest disadvantage of using credit is the temptation to overspend.

Accepted Answer

When people use credit cards, they may feel less connection to their spending because they aren't handing over physical cash. This can make it easier to overspend on things they might not have bought if they were using cash.

Question 17

Installment sales credit is a loan that allows you to receive high-priced items, such as large appliances or furniture.

Accepted Answer

Installment sales credit allows consumers to make purchases of high-priced items and pay for them over time with regular payments, similar to a loan.

Question 18

There are very few valid reasons for using credit.

Accepted Answer

While it is important to use credit responsibly, there are valid reasons for using credit, such as building credit history, making large purchases, or managing unexpected expenses.

Question 19

Most economists do not recognize consumer credit as a major force in the American economy.

Accepted Answer

Consumer credit is a significant force in the American economy as it contributes to consumer spending and drives economic growth. Economists recognize this and study trends and patterns in consumer borrowing to understand and predict future trends in the economy.

Question 20

College students are not a prime target for credit card issuers.

Accepted Answer

College students are actually a prime target for credit card issuers because they are often just starting to build their credit histories and are seen as potential long-term customers. However, there are regulations in place to protect students from getting into overwhelming credit card debt.

Quiz 6: Introduction to Consumer Credit