Types of Credit

Front

Where do banks get the money to lend out to consumers? Options: From their clients' credit card accounts, From their clients' savings accounts, From the Federal government, From their own money vaults

Back

From their clients' savings accounts

Front

How do banks make money off of the credit they issue? Options: They charge a large, one-time fee at the start of the loan, They take out a small fee each month from your checking account, They charge a high interest rate on the loan, This is a trick question - they DON'T make money!

Back

They charge a high interest rate on the loan

Front

Which of the following is NOT a typical type of credit? Mortgage, Overdraft, Credit Card, Pre-Paid Debit Card

Back

Pre-Paid Debit Card

Front

Which of the following is typically a SECURED loan? Auto Loan, Student loan, Credit Card Balance, Overdraft

Back

Auto Loan

Front

If the collateral for your secured loan can be taken away, why get a secured loan at all? Options: Because they usually have a higher interest rate, Because they usually have a lower interest rate, Banks give you an extra 90 days to make a missed payment, Banks typically don't charge interest for the first 12 months

Back

Because they usually have a lower interest rate

Front

What may NOT impact the interest rate on your loans? Your relationship with the financial institution, Your credit score, The loan amount, Your level of education

Back

Your level of education

Front

True or False: A cosigner's credit history can be affected by the loan they are cosigned on.

Back

True

Front

Why does the amount of INTEREST you owe on a loan decrease over time? Options: The institution trusts you more, so they lower the interest; With each payment, principal increases; so interest lowers; Banks are legally required to lower interest rates over time; With each payment, principal decreases, so interest lowers

Back

With each payment, principal decreases, so interest lowers

Front

What is the purpose of a Schumer box when applying for a credit card?

Back

It summarizes information like interest rates, fees, and grace periods

Front

How do you avoid paying interest on your credit card (or any other loan for that matter)? Options: Always make the minimum payment over time, Pay interest 1st, then pay what you can on leftover balance, Always make the full payment on time, Pay the principal 1st, then pay what you can on interest

Back

Always make the full payment on time