Loans!
Fill in the blank: A loan is money borrowed that must be ____ back with interest.
Paid! Loans allow people to borrow money for big expenses, but they must be repaid along with extra charges called interest.
True or False: Credit cards allow you to borrow money up to a limit set by the bank.
True! Credit cards provide a credit limit, which is the maximum amount you can borrow. You must pay back what you spend, and if you don’t, you’ll be charged interest.
True or False: Debit cards let you borrow money from the bank.
False! Debit cards are linked to your bank account and only allow you to spend money that you already have.
True or False: Interest is the extra amount you pay when borrowing money.
True! Interest is the cost of borrowing money. It is paid to the lender in addition to the amount originally borrowed.
What is a financial goal?
A target or plan for managing money, such as saving for a car, paying off debt, or building an emergency fund. Financial goals help people make smart money decisions and plan for the future.
What type of loan is used to buy a house?
Mortgage! A mortgage is a long-term loan specifically used for purchasing a home, usually paid off over 15 to 30 years.
Fill in the blank: The amount you owe on a credit card before making a payment is called the ____.
Balance! Your credit card balance is the total amount of money you owe. If you don’t pay it in full, you’ll be charged interest.
What type of account is linked to a debit card?
Checking account! A checking account is where your everyday spending money is stored. A debit card allows you to access these funds for purchases.
What is an annual fee on a credit card?
A yearly charge for having the credit card. Some credit cards charge an annual fee for access to their benefits, even if you don’t use the card often.
What is a credit limit?
The maximum amount you can charge on a credit card. Your credit limit is set by the credit card company based on factors like your income and credit history.
What is a car loan?
A loan used to finance the purchase of a vehicle.
What is the minimum payment on a credit card?
The smallest amount you must pay by the due date to avoid late fees.
Fill in the blank: If you spend more money than you have in your account with a debit card, you may be charged an ____ fee.
Overdraft! An overdraft occurs when you spend more money than what’s available in your account. Some banks charge high fees for overdrafts.
Fill in the blank: The percentage charged for borrowing money is called the ____ rate.
Interest! Lenders charge interest to make a profit when they lend money. The higher the rate, the more expensive it is to borrow.
True or False: A higher credit score usually leads to lower interest rates on loans.
True! Lenders offer better loan terms to people with high credit scores because they are seen as less risky.
True or False: A student loan must always be repaid, even if you don’t graduate.
True! Student loans are legal agreements to repay borrowed money. They must be repaid regardless of whether the borrower completes their degree.
True or False: Making only the minimum payment on your credit card will quickly pay off your balance.
False! Since credit cards charge interest on the remaining balance, making only the minimum payment can cause debt to grow over time.
True or False: Debit card transactions can impact your credit score.
False! Debit card transactions do not affect your credit score because they do not involve borrowing money. Only credit-based transactions impact your score.
What does "APR" stand for?
Annual Percentage Rate! APR represents the total yearly cost of borrowing money, including interest and certain fees. It helps borrowers compare different loan options.
What does "living within your means" mean?
Spending less than or equal to what you earn, avoiding unnecessary debt. Overspending leads to financial problems, while staying within your budget helps build financial stability.
What happens if you fail to repay a loan on time? (Name two possible consequences.)
Late fees, damaged credit score, repossession, or legal action. Failing to make loan payments on time can lead to financial penalties, difficulty getting future loans, and even losing the item you borrowed money for (such as a car).
Name two advantages and two disadvantages of using a credit card.
✅ Advantages: Builds credit history, offers rewards/cashback.
❌ Disadvantages: High interest if not paid in full, can lead to debt.
What is one major risk of using a debit card instead of a credit card for subscription purchases?
A negative balance! With a debit card, unauthorized transactions take money out of your account immediately, which may lead you to having negative funds in your checking account.
If you don’t pay off your credit card balance in full, what happens?
Interest is charged on the remaining balance. Any unpaid amount on a credit card will carry over to the next month, and interest will be added, making the total owed even larger.
Name two factors that can lower your credit score.
Late payments, high credit utilization, applying for too many credit cards, or defaulting on a loan. A low credit score makes it harder to get approved for loans, credit cards, and even renting an apartment.