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What is the potential risk of using credit cards if not managed properly?
High interest rates can lead to an accumulated debt that is difficult to repay.
What is an example of revolving credit?
Credit Card
What is a common feature of secured debt?
It is backed by collateral
What does ARP stand for, and what does it represent?
Annual Percentage Rate: It represents the cost of borrowing money on a credit card over one year.
What is the primary benefit of choosing a fixed interest rate mortgage over a floating interest rate mortgage?
A fixed interest rate mortgage has payments that remain constant over time .
What is a benefit of using credit responsibly?
It allows you to make large purchases now and pay for them over time.
Which type of credit requires the borrower to make equal monthly payments over a specified period?
Installment Credit
What distinguishes a credit card from a debit card?
A credit card allows you to borrow money for purchases, while a debit card draws money directly from your bank account.
What happens if you only pay the minimum payment on your credit card balance?
Interest will be charged on the remaining balance.
What is an amortization schedule used for in a loan
To break down each payment into principal and interest over time.
Why is building credit history important?
A good credit history makes it easier to obtain loans with favorable terms.
Which source of credit typically targets individuals who may not qualify for traditional loans and charges high interest rates?
Payday lenders
What is a secured credit card?
A credit card that requires a cash deposit as collateral.
Which of the following is a potential risk of using a credit card?
Accumulating high-interest debt if the balance is not paid in full.
What happens if a homeowner defaults on their mortgage loan
The lender can foreclose on the property and sell it to the recover the unpaid loan balance
How can using credit responsibly benefit an individual in an emergency?
It provides a financial safety net when immediate funds are needed.
Which type of credit is typically used for utility bills and requires payment at the end of the billing period?
Open credit
What best describes a rewards credit card?
A card that provides points, cash back, or miles for purchases.
What is a late fee in terms of credit card payments ?
A penalty charged for not paying at least the minimum payment by the due date.
Which of the following is a key factor to consider when deciding between renting and buying a home?
The financial stability and long-term goals of the individual.
What could be a consequence of missing credit card payments?
It could negatively impact your credit score.
Which factor directly influences your ability to access credit by indicating the risk level to lenders?
Credit Scores
What is the grace period on a credit card?
The period during which you can pay your balance without incurring interest charges.
What is the primary difference between a loan and a credit card?
A loan is a lump sum of money to be repaid over time, while a credit card offers revolving credit for an ongoing borrower.
What is collateral in the context of a mortgage loan?
The asset pledged by the borrower to secure the loan.