Credit Cards
What is one way you can avoid paying interest on credit card purchases?
Pay the balance in full.
What is an auto loan?
Money borrowed to purchase a vehicle.
What are the two most common types of Mortgages (years)
15 Year and 30 Year
What is a credit report?
A record of your credit history.
Is all debt bad?
No
Name one benefit that credit cards can offer when used responsibly.
Rewards / cash back / convenience / fraud protection.
What is a down payment?
Money paid upfront toward a purchase.
A mortgage is an example of what type of loan because the house is used as collateral?
Secured loan.
What is a credit score?
A number that represents your credit risk.
What is predatory lending?
Unfair or abusive lending that takes advantage of borrowers.
Why can using a credit card for online purchases be safer than using a debit card?
It doesn't directly take money from your checking account and generally provides strong fraud protections.
What is the principal on a loan?
The amount borrowed.
What is collateral?
An asset used to secure a loan.
What is one of the most important things you can do to maintain a good credit score?
Pay your bills on time.
What is one warning sign of a predatory loan?
Extremely high interest rates / excessive fees / hidden fees / misleading terms.
Why do credit card companies offer cash-back rewards and points?
To encourage customers to use their cards and generate revenue through interest, fees, and merchant transaction fees.
Why can a longer auto loan result in paying more money overall?
You may pay interest for a longer period.
What happens if a borrower fails to make mortgage payments and cannot resolve the problem?
The lender may eventually take the home through foreclosure.
Name three factors that can affect a credit score.
Payment history, amounts owed, length of credit history, new credit, or credit mix.
Why can payday loans become dangerous?
High fees and interest can trap borrowers in a cycle of debt.
You charge $1,000 on a credit card but pay the entire statement balance by the due date. The APR is 21%. How much credit card interest might you pay on those purchases?
$0
A car costs $30,000. You put $6,000 down. How much do you need to borrow before interest?
$24,000.
What is amortization?
The process of paying off a loan over time through scheduled payments of principal and interest.
You check your credit report and find an account you never opened. What should you do?
Report/dispute the account and investigate possible identity theft.
You are offered a loan with a low monthly payment, but the loan lasts 8 years. What should you investigate before accepting it?
Interest rate, total cost, loan term, fees, and total amount paid.