Sudden Interest
Shira is trying to decide between getting a debit card, a prepaid debit card, and a credit card. Which statement is true?
A. All 3 cards are completely different
B. Debit cards and prepaid debit cards are the same
C. Debit cards and credit cards are the same
D. All 3 cards are completely the same
All 3 cards are completely different
Which of the following statements comparing credit and debit cards is TRUE?
A. Far more businesses accept credit cards than debit cards
B. Credit cards pull money directly from your bank account, while debit cards get their money from Visa or Mastercard
C. Credit card companies provide you with a monthly statement, while debit cards do not
D. With debit cards, you're spending your own money at point of sale, but with credit cards, you're getting a loan that you need to pay back later
With debit cards, you're spending your own money at point of sale, but with credit cards, you're getting a loan that you need to pay back later
Which of the following is most likely to represent a fixed rate, secured debt?
A. A student loan
B. A credit card
C. A prepaid debit card
D. An auto loan
D. An auto loan
Which of these statements best explains why it's often a good idea to pay more than the monthly amount due on an amortized loan?
A. Every time you pay extra, the lender will reduce the interest rate they're charging by a small amount
B. The extra payment will be applied to the principal amount you owe, which will pay down your debt more quickly
C. The extra payment will be applied to the interest you owe, which will reduce the overall cost of your loan
D. Amortized loans typically have much higher interest rates than credit cards, so they're the best place to put your extra cash
B. The extra payment will be applied to the principal amount you owe, which will pay down your debt more quickly
If you are having trouble making auto loan payments and are really following a tight budget, which recommendation below represents the WORST advice?
A. Find an extra source of income by taking a second job, working longer hours, or borrowing from family if they can afford to help
B. Stop making payments on some of your debts so you can focus on getting the most expensive or largest debts under control
C. Continue making all payments and call your lenders and see if you can negotiate lower monthly payments, lower interest rates, or longer terms
D. Explore whether a free or non-profit credit counseling service could help
B. Stop making payments on some of your debts so you can focus on getting the most expensive or largest debts under control
The average APR for a payday loan is closest to …
400%
Constant, Decreases, Increases
Which of the following is true about fixed and adjustable-rate mortgages?
A. Fixed-rate mortgages have a constant payment every month, but an interest rate that increases throughout the term of the loan
B. Fixed-rate mortgages have a fixed interest rate for a few years, after which time the interest rate fluctuates according to general market conditions
C. Adjustable-rate mortgages have a fixed interest rate for a few years, after which time the interest rate fluctuates according to general market conditions
D. The two mortgages work the same way but are called different names depending if they come from a bank or a credit union
C. Adjustable-rate mortgages have a fixed interest rate for a few years, after which time the interest rate fluctuates according to general market conditions
Which of these credit payback strategies would lead to the HIGHEST overall cost?
A. Paying off your credit card bill in full every month
B. Paying 20% of your credit card balance every month on time
C. Making the minimum payment (3% of your credit card balance) every month on time
D. Making the minimum payment (3% of your credit card balance) every month with an occasional late payment
D. Making the minimum payment (3% of your credit card balance) every month with an occasional late payment
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?
A. The minimum monthly payment for payday loans is usually only $10 or $15, so a lot of interested accumulated
B. Upfront, Denise knew there would be $450 of fees attached to the loan, but she took out the loan anyway
C. 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
D. Denise not only paid the $300 she owed, but she prepaid an extra $450 in case she needs another loan in upcoming months
C. 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
Taylor is about to go car shopping, and she has $5000 saved that she can use for a down payment while still having extra cash in her emergency fund. She expects the exact model car she’s looking for to cost $35,000. If her top priority is having the lowest monthly payments possible, which advice should she follow?
A. Put in $0 for your down payment, and choose a loan with a short term length
B. Put in $2500 for your down payment, and choose a loan with a short term length
C. Put in $3500 for your down payment, and choose a loan with a long term length
D. Put in $5000 for your down payment, and choose a loan with a long term length
D. Put in $5000 for your down payment, and choose a loan with a long term length
Reading through a credit card’s Schumer Box, you see the APR for a specific card is set at 9.99% - 23.99%. Which statement is true?
A. When given a range of APRs like this, you can assume most cardholders pay the lowest rate listed
B. Your APR will be within that range, depending on the strength of your credit history
C. In this case, you want the highest APR in the range because you’ll earn more
D. The APR on credit cards is usually fixed, so it won't be adjusted as long as you are a cardholder
B. Your APR will be within that range, depending on the strength of your credit history
What is an advantage of using a credit card?
A. It will not affect your credit score or credit history
B. Since it is tied directly to your checking account, it prevents you from spending money you do not have
C. If you need to carry a balance, the interest rates are generally quite low (less than 5%)
D. You can make an emergency purchase that you otherwise don’t have the money to pay for right now
D. You can make an emergency purchase that you otherwise don’t have the money to pay for right now
A loan with a shorter term length will have __________ monthly payments, and you will pay __________ in total interest.
higher, less
Select the statement below that accurately describes a characteristic of a credit card.
A. You owe the same payment every month
B. You must have money deposited into a checking account to use the credit card for purchases
C. Making full payments on-time every month is the only way to avoid interest charges
D. They do not charge interest
C. Making full payments on-time every month is the only way to avoid interest charges
Which of the following statements is CORRECT about secured loans?
A. They are a good choice to use for student loans
B. If the borrower does not make payments, the lender can repossess the item
C. In the event of default, the borrower loses nothing except for the down payment
D. They usually have higher interest rates as compared with unsecured loans
B. If the borrower does not make payments, the lender can repossess the item
As a young adult, all of the following are good strategies for building credit, EXCEPT:
A. Open a credit card, with your parent or guardian as a cosigner
B. Take out a payday loan
C. Become an authorized user on a credit card used by your parent or guardian
D. Open and use a secured credit card
B. Take out a payday loan
Amy and Chuck each buy a house in the same neighborhood for $250,000. Amy's monthly mortgage payment is $400 more per month than Chuck's. Which one of the following statements could explain this difference?
A. Amy chose a shorter term for her mortgage, so her monthly payments are higher
B. Amy made a larger down payment, so her monthly payments are also larger
C. Chuck chose a shorter term for his mortgage, so his monthly payments are also lower
D. Chuck has a lower credit score, so his interest payments are also lower
A. Amy chose a shorter term for her mortgage, so her monthly payments are higher
Duc has a credit card with a $1000 credit limit. His outstanding balance is currently $800. What is the maximum amount he can now spend on this credit card?
$200
The details of any loan will include the following 3 components:
The principal, the interest rate, and the loan term
Credit card disclosure: "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." Identify the true statement.
The 25 days after the end of the billing cycle is referred to as the grace period
An excellent credit score will help with which aspect of car financing?
Qualifying for a low interest rate
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
Trudy tells her mom that she wants to buy a house within two years of graduating from college. Her mom says Trudy will need a down payment first. What is a down payment?
A large sum of money you pay when taking out a mortgage so that the principal of your loan is smaller
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