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What is credit?
Goods, services, or money received in exchange for a promise to pay a definite sum of money at a future date
What is one characteristic of closed‐end credit?
Equal payments are required on a regular basis until the loan is repaid.
What is one characteristic of open‐end credit?
Credit is extended in advance so the borrower does not have to apply for credit each time credit is desired.
How can a cardholder avoid paying interest on a credit card?
Pay the balance in full every month.
Which of the following is not considered an advantage to using a credit card?
Credit cards eliminate the need for savings.
If a credit card is used properly, what benefits does it have for the cardholder?
The cardholder will develop a positive credit history.
According to the Federal Truth in Lending Act, where must the terms and conditions of credit cards be posted?
In the Schumer Box
What is a Penalty APR?
The interest rate charged on new transactions if the penalty terms in the credit card contract are triggered
What is a balance transfer?
Transferring credit card debt from one credit card account to another
When reviewing a credit card statement, what is the past due amount?
The minimum payment due not paid by the due date
Paying the minimum payment on a credit card every month will:
make the final amount paid substantially higher than the amount initially charged to the card
Becky no longer wants to use her Clothes‐R‐Us store credit card. What should she do with the credit card?
Close the account by phone and in writing and cut up the card.
What is a safety tip to remember with credit cards?
Keep a list of all cards, account numbers, and phone numbers separate from cards.
Which of the following best describes a credit report?
A summary of a consumer's credit accounts and payments on those accounts
Which of the following is NOT included in an individual’s credit report?
Medical information
What information is NOT included when calculating an individual’s credit score?
Consumer’s salary
A consumer will develop a positive credit history if they:
maintain reasonable amounts of unused credit
A low credit score will affect an individual financially because the _______________.
the interest rate of loans will be higher
Jenny is 18 years old and has applied for credit for the first time. Her credit application was declined, because she had no credit history. What would you recommend Jenny do to begin to build a positive credit history?
Obtain a secured credit card
The best place for a consumer to acquire his/her credit report is at a:
credit reporting agency
When may a person view his/her credit report for free?
Once a year, from each of the three main credit reporting agencies
Which would result in a consumer developing a negative credit history?
Applying for credit many times within a short period of time
Credit scores range from ________ to _________
300 / 850
What are the two specific types of credit? (not open and closed end)
loans and credit cards
You should never exceed_________ (what fraction) of your credit card limit
1/3
A synonym for a lender is a
creditor
What is viewed as a trap by financial experts in terms of credit cards?
the minimum payment
What is the difference between the interest rate and the APR?
The interest rate is the annual rate, while the APR includes any fees calculated into the loan
What is an introductory rate also called?
teaser rate
What is the largest component of your credit score?
payment history
Your credit score is more commonly referred to as your _________ score.
FICO
Tell me TWO advantages of credit cards and two disadvantages (ones I covered and emphasized as most important)
Advantages --
establishes credit for larger purchases
good for emergencies
you can purchase big tickets items
spread out the payment
Disadvantages –
creates debt and overspending
obligates future income
interest very expensive
. Tell me what you can expect to receive or happen if you have a high credit score. List three of the most important covered in class:
lower interest rates on loans and all credit,
better credit deals,
easier approvals,
opportunity to show around for different forms of credit
Tell me what you can expect to receive or happen if you have a low credit score. List three of the most important covered in class:
difficulty getting loans,
much higher interest rates,
difficulty renting apartment,
difficulty getting insurance,
difficulty getting a job,
viewed as high risk by creditors
How much more do you typically spend on credit than if you had paid with cash?
12- 18%
What determines your credit limit on credit cards?
cardholder’s perceived creditworthiness_
Explain if having no credit is a good or bad thing and why:
BAD THING, you have no credit history to prove if you are creditworthy or reliable with paying your bills. Just as bad as having bad credit.
Tell me three of the six most important credit card tips:
Write please see ID after signature,
2. don’t leave cards lying around, report lost/stolen cards,
3. Close unwanted accounts and cut up cards,
Don’t give out account numbers carelessly,
5. Keep a lit of all cards, account numbers, and phone numbers,
Shred all pre-approved offers and applications
What is the Truth in Lending Act?
The US federal law designed to promote informed use of consumer credit by disclosing specific terms and costs
What is the Fair Credit Billing Act?
The US federal law that lays out consumer rights to dispute charges
Pre-approved credit which can be used for the purchases of goods and services
credit card__
When you withdraw cash against the credit card limit
cash advance_
what type of credit are Credit cards
open-end credit
Statement you receive that outlines important information and transactions on your credit card
credit card statement__
The price paid for borrowing money
interest
An individual’s ability and willingness to pay money back
creditworthiness
Person or organization who has the resources to provide money to people who need to borrow it
lender___
Where terms and fees of credit cards are disclosed
schumer box__
An APR that may be charged after a credit card is opened
introductory rate
Person or organization that is receiving the borrowed money
borrower
A record of a consumer’s credit history that includes information about credit card use as well as the use of other types of credit
credit score__
Interest rate that changes during the life of the loan
variable rate_
The amount of money borrowed in a loan
principal
When you transfer debt from one card to another card
balance transfer_
what type of credit are Loans
closed-end credit
Interest rate that stays the same during the life of the loan
fixed rate_
The time between the due date and the billing date in which no interest is charged
grace period
Charged when a cardholder does not make the minimum monthly payment by the due date
late payment fee______
When goods, services, or money is received in exchange for a a promise to pay a definite sum of money at a future date
credit
Charged if the account balance goes over the preestablished credit limit
over the limit fee
A yearly fee charged just for having the credit card
annual fee
Person or organization that is receiving the money
borrower
an individual’s ability and willingness to pay the money back (often measures FICO)
credit worthiness
When you buy on credit, you always make pack ___ than the original amount of the purchase.
(12-18%)
When borrowing on credit or w credit card, the borrower normally pays back in
monthly payments
Note 
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