Credit vs. Debit
True or False: Debit cards, prepaid debit cards, and credit cards are all the same type of financial card.
False — All 3 cards are completely different.
What is a down payment when taking out a mortgage?
A large sum of money you pay when taking out a mortgage so that the principal of your loan is smaller.
A loan with a shorter term length will have ________ monthly payments, and you will pay ________ in total interest.
Higher monthly payments, but LESS in total interest.
What is the average APR for a payday loan closest to?
400%
Which credit card payback strategy results in the HIGHEST overall cost?
Making the minimum payment (3% of balance) every month with an occasional late payment.
What statement comparing credit and debit cards is TRUE?
With debit cards, you're spending your own money at point of sale, but with credit cards, you're getting a loan that you need to pay back later.
What kind of loan represent a fixed-rate, secured debt?
An auto loan
Why is it often a good idea to pay more than the monthly amount due on an amortized loan?
The extra payment will be applied to the principal amount you owe, which will pay down your debt more quickly.
Why are payday loans so much easier to qualify for than traditional bank loans?
Payday loans require proof of employment or regular income, but NOT a credit check.
If a credit card's Schumer Box lists an APR range of 9.99% – 23.99%, what determines your specific rate?
Your APR will be within that range, depending on the strength of your credit history.
What is a major advantage of using a credit card?
You can make an emergency purchase that you otherwise don't have the money to pay for right now.
How do Adjustable-Rate Mortgages (ARMs) work compared to fixed-rate mortgages?
Adjustable-rate mortgages have a fixed interest rate for a few years, after which time the interest rate fluctuates according to general market conditions.
When loans are amortized, monthly payments are ________, while the amount applied to interest ________ and the amount applied to principal ________ over time.
Constant, Decreases, Increases.
As a young adult, there are many good strategies for building credit, EXCEPT:
Taking out a payday loan.
A disclosure states: 'Your due date is at least 25 days after the end of the billing cycle. We will not charge interest if paid in full.' What is this 25-day period called?
The grace period.
What is the ONLY way to avoid interest charges on a credit card?
Making full payments on time every month.
Taylor wants to buy a $35,000 car and has $5,000 saved for a down payment. If her top priority is having the lowest monthly payment possible, what should she do?
Put in $5,000 for her down payment and choose a loan with a long term length.
An excellent credit score will help with which aspect of car financing?
Qualifying for a low interest rate.
Why do credit card companies prefer that cardholders make only the minimum monthly payment rather than paying in full?
This enables the credit card company to make more money in interest charges.
What is a CORRECT statement regarding secured loans?
If the borrower does not make payments, the lender can repossess the item (collateral).
Duke has a credit card with a $1,000 credit limit and an outstanding balance of $800. What is the maximum amount he can now spend on this credit card?
$200 ($1,000 limit − $800 balance).
Amy and Chuck each buy a house in the same neighborhood for $250,000, but Amy's monthly payment is $400 more per month than Chuck's. What explains this difference?
Amy chose a shorter term for her mortgage, so her monthly payments are higher.
If you are having trouble making auto loan payments on a tight budget, which recommendation is the WORST advice?
Stop making payments on some of your debts so you can focus on getting the most expensive or largest debts under control.
Denise took out a $300 payday loan in August and ended up paying $750 by February. How did this happen?
Payday loans must be paid in full within two weeks; if not, the only option is to renew the loan for a high penalty fee, which she did approximately 12 times.
Based on a standard Schumer Box, what statement is TRUE regarding a 28.99% Penalty APR?
A 28.99% Penalty APR may be applied to your account if you make a late payment or exceed your credit limit.