Credit Cards 1
True or False:
With debit cards, you're spending your own money at point of sale, while with credit cards, you're promising to pay back the money eventually
TRUE
A difference between credit cards and debit cards
Debit cards do NOT help build a credit history.
Because they don't have the money to buy something. Loans help people make big purchases that they can pay off over time.
When loans are amortized, monthly payments are _______
constant, they stay the same
One of the primary factors determining your card's A.P.R. is your...
Credit Score
What are the three options you have to pay off your credit card every month?
1. Pay the entire balance in full
2. Pay only the minimum payment
3. Pay more than the minimum payment, but not the entire balance (as much as you can afford)
Fill in the blank:
The shorter your term length, the _______ your monthly payments, and the _______ the total interest you will pay.
HIGHER, LOWER
When loans are amortized, the amount of your monthly payment applied to interest ________ and the amount of your monthly payment applied to the principal _______ over time.
decreases, increases
When is the "right" time to open a credit card?
What is the only way to avoid interest charges
Making full payments on time every month
What type of 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?
Payday Loan
Why is it 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, and you will pay less interest over time.
I am a type of credit card that requires cardholders to make a security deposit equal to the credit limit on their account. Due to this deposit requirement, I am often a good choice for young people looking to establish a credit history.
What is an advantage of using a credit card?
If you pay off your balances every month in full, it's like getting a short-term interest-free loan
An example of a loan with a fixed rate that is also a secured debt
Auto Loan
What could explain why people in the same neighborhood, have significantly different mortgage payments?
What is this statement describing?
Your due date is at least 25 days after the end of the billing cycle. We will NOT charge you interest on new purchases provided that you have paid your previous balance in full by the due date each month."
The Grace Period (25 days after the billing cycle)
Why it is important for a young adult to open a credit card. (2 answers)
To establish a credit history AND
To learn how to manage credit responsibly.
Two factors that will guarantee a low MONTHLY payment on a car loan.
Large down payment and a long term
Identify the principal, term, and interest rate in the following scenario.
Marie is saving for a down payment on a car. She currently has $5,000 saved. The car that she wants is $25,000. She wants to pay the car off in five years.
The dealership has given her two options: 2.5% interest over 36 months OR 5.5% interest over 60 months.
Principal: $20,000
Term: 5 years (60 months)
Interest Rate: 5.5%