USE ME ECONOMICS TEST REVIEW: CREDIT CARDS AND DEBT

Define Lease

A long term rental agreement on a car; a form of secured long term debt

Define FTC (federal trade commission)

Is one of many US federal agencies that regulate the consumer credit system and enforce the laws related to it.

Define Paycheck garnishment

Is a court ordered attachment that allows a lender to make monies owed directly from borrowers paycheck

Which group is the huge target of credit card companies today?

Teens

How many free credit reports are consumers allowed each year?

One (1)

What summarises how the use of a credit card for purchases instead of cash can change one’s spending behavior?

Consumers typically spend more when using credit as opposed to cash purchases

Is it okay to use a credit card if you pay it off every month true or false?

False

Define Depreciation

A decrease in loss in value

Define Loan term

Is a time frame that a loan agreement is in force

Define Credit report

Is a detailed report of an individual’s credit history

Define Debt Snowball

Includes a list of all debts organized from largest to smallest balance.

(Minimum payments are made to all debts except for the smallest which is attached with the

What are the factors that affect a credit score?

• Type of debt

• New debt

• Duration of debt

Borrowing money can have serious consequences and prevent you from building wealth true or false?

True

You need a credit card to rent a car or check in to a hotel true or false?

False

What is cosigning a loan?

A co-signer has agreed to pay a loan if the original person fails to make the payments.

If you do not have a FICO score, what factors will determine whether or not you qualify for a mortgage?

History of rental and utility payments.

What is the drive free method of purchasing a car?

• Plan your purchase in advance using the sinking fund method of saving

• Place your savings in a mutual fund so that your money can make more money

• Start with an inexpensive car and gradually move up in car value as your savings increases

Define Credit Card

A card issued by a bank that allows users to finance a purchase

How many years is individual account information removed from your credit report?

10 years

What cannot be done with a debit card but can be done with a credit card?

Go into debt

Define Upside down

When a person owes more on an item (like a car or house) than its worth

What are the good ideas for getting out of debt?

• Quit borrowing money

• Get a part time job or work overtime

• Sell something

What is a credit score intended to measure?

The risk of you not repaying debt

Define Introductory rate

An interest rate charged to a customer during the early stages of a loan.

(the rate often goes up after a specified period of time)

Define APR (Annual Percentage Rate)

Cost of borrowing money on an annual basis.

(APR takes into account the interest rate, and other related fees on a loan)

What is the most cost effective option for purchasing a home?

The most ideal way to buy a house is with 100% down and if that is not an option you should get no more than a 15 year fixed rate mortgage with a down payment of at least 10%

What are the signs of Identity theft?

• A call from a collection agency about a debt you didn’t incur

• Bank and billing statements don’t arrive on time

• Your credit report shows accounts you didn’t open

Define Annual Fee

A yearly fee that is charged by the credit card company for the convenience of the credit card

What are the three credit card bureaus?

Experian, Transunion, and Equifax

You must establish credit in order to buy a house true or false?

False