Credit Cards
This is what the APR on your credit card tells you.
What is the Annual Percent Rate / interest rate?
You pay this back on a loan in addition to the principal in order to pay the lender for the service of lending you money.
What is interest?
PayDay loans tend to have higher these, sometimes close to 400%
What are interest rates?
Sarah is planning to buy a house. She has saved enough for a down payment and intends to take out a mortgage with a low interest rate. The house is within her budget, and she believes its value will increase over time. Which of the following statements BEST categorizes her debt?
It's a bad debt since homes can sometimes decrease in value
It's a good debt as owning a house is often seen as an investment that can provide a future return
It's a bad debt if she cannot pay off the mortgage quickly
It's a good debt only if she avoids paying any interest
It's a good debt as owning a house is often seen as an investment that can provide a future return
Name one way to decrease the amount of interest you pay on your credit card.
Have a higher credit score, pay off your balance before it's due, choose a credit card with a lower interest rate, (any reasonable answer)
This is the definition of an amortizing loan
What is a loan that will be fully paid off by the end of the loan term?
Why are payday loans so much easier to qualify for than traditional bank loans?
Payday loans require proof of employment or other regular income but not a credit check
A loan with a shorter term length will have __________ monthly payments, and you will pay __________ in total interest.
higher/lower
more/less
This is how you, as somebody under 21, could open a credit card and start building a credit score.
Be an authorized user on a parent's card, have a co-signed credit card with a parent or guardian
This is how the percent of your monthly payment going to principal and interest changes over the loan term
What is: at first, more of your payment goes toward interest, then more of your payment goes toward principal
The average APR for a payday loan is closest to …
4%
14%
40%
400%
400%
Select the statement below that accurately describes a characteristic of a credit card.
You owe the same payment every month
You must have money deposited into a checking account to use the credit card for purchases
Making full payments on time every month is the only way to avoid interest charges
They do not charge interest
Making full payments on time every month is the only way to avoid interest charges
This is the standardized presentation of credit card information that all creditors provide. You have practiced reading them, and they organize the information in a clear way.
What is a Schumer Box?
This describes why it's a good idea to make extra payments on an amortizing loan
The extra payment will be applied to the principal amount you owe, which will pay down your debt more quickly, making your loan less expensive overall
Denise took out a payday loan for $300 in August. By February of the next year, she was able to pay back the loan, but she had spent a total of $750 doing so. What’s the most likely story of how this happened?
Payday loans must be paid in full within two weeks, and if not, the only option is to renew the loan for a high penalty fee, which she did approximately 12 times
Why would credit card companies prefer that their cardholders make the minimum monthly payment every month rather than paying their total balance in full?
This enables the credit card company to make more money
What are 2 advantages of using a credit card?
Will accept any 2:
You can build your credit score
It gives you access to credit
You are protected from fraud (hackers stealing your money)
Rewards programs: Miles, cash back on groceries, purchases
In an amortizing loan with the same monthly payment, this is the explanation for why each month you pay more towards the principal and less towards the interest
What is: each month when you pay your monthly payment, you reduce your principal. Then, the next month, your interest will be lower because it is a percentage of a smaller principal. So, with the same monthly payment and a lower interest cost, you can pay off more of the principal
These are two types of marketing techniques that predatory lenders use
What are They offer instant approval and They offer quick cash
Your brother and sister-in-law want to buy their first house. Write two sentences of mortgage advice you want them to know.