Chapter 10 and 9 Test

What are the various financial institutions?

Commercial banks, savings banks, credit unions, savings and loans, and brokerage firms.

What do you call a check that has not yet cleared your bank?

Outstanding check.

What is a cashier’s check?

A check that is issued and guaranteed by a bank.

What is relationship banking?

An ongoing group of services provided by a bank that involves assessing what a business has to offer and determining services and fees.

What are the features of a savings account?

A safe place to store money, typically earning a low rate of interest.

What are some benefits of saving?

Prepares you for emergencies, provides flexibility for better buying decisions, and helps accumulate money for large purchases.

What are the features of debit cards?

Similar to an ATM card, used for point-of-sale purchases, with expenses deducted from your account immediately.

What is the advantage of compound interest?

Interest that accumulates on both principal and interest, leading to faster growth of money.

What is a bounced check?

A check that has insufficient funds (NSF) to cover the amount.

What is the cost of borrowing money?

Interest.

What is impulse buying?

Purchasing something on the spot without thinking.

What is Step 1 in a buying plan?

Define your goal.

What is Step 2 in a buying plan?

Set a spending limit.

What is Step 3 in a buying plan?

Research your options.

What is Step 4 in a buying plan?

Evaluate your options.

What is Step 5 in a buying plan?

Make the purchase decision.

What are the benefits of credit?

Increases standard of living, is convenient, safer than cash, builds credit history, and increases financing options.

What are the dangers of credit?

Can lead to overspending, reduce comparison shopping, be expensive, tie up future income, and be dangerous in economic downturns.

What are some examples of installment loans?

Home mortgage or car loan.

What are some examples of revolving credit?

Credit cards, PLOCs, and HELOCs.

What is a secured loan?

A loan where collateral serves as security for payment.

How can a person improve their credit score?

Pay debts on time, pay more than minimum, reduce outstanding credit, avoid multiple new accounts, keep balances low.

Why do production loans generally have lower interest rates than consumer loans?

They provide businesses the tools to generate revenue, thus lowering risk.

Who can see your credit report?

Banks, creditors, student loan providers, utility companies, insurance companies, landlords, employers, government agencies, and those with a court order.

What is the basis of most credit scores?

A numeric rating compiled on a point system by credit bureaus.

What is unused credit?

The difference between your credit limit and credit balance.

What is a creditor?

An individual or entity that has lent money.

What is collateral?

Something of value that can be repossessed if the borrower defaults.

Which type of bankruptcy is also referred to as straight bankruptcy or liquidation bankruptcy?

Chapter 7 bankruptcy.

Which type of bankruptcy is also referred to as business reorganization?

Chapter 11 bankruptcy.

What are the benefits of bankruptcy?

Automatic stay against creditors, erasure of most debts, ability to keep some property.

What are the costs of bankruptcy?

Damages credit rating, difficult to obtain credit, and some debts are not discharged.

What is the 20/10 rule?

An acceptable debt load limits installment debt to 20% of yearly take-home pay and credit card payments to 10% of monthly take-home pay.