Fin Lit Credit Card Test

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

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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

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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:

1. 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,

4. Don’t give out account numbers carelessly,

5\. Keep a lit of all cards, account numbers, and phone numbers,

6. 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