Why does the amount of INTEREST you owe on a loan decrease over time?

With each payment, principal decreases, so interest lowers.

How do you avoid paying interest on your credit card (or any other loan for that matter)?

Always make the full payment on time

Which is TRUE when you make only the minimum payment each month?

You are charged interest on the remaining balance.

Which is TRUE about Payday loans? Options: You can pay them back in installments, You are charged a 1-time fee for the loan, Most people successfully pay these loans back, You need a credit card account to get one

You are charged a 1-time fee for the loan

Which of the following is TRUE about an auto LOAN and a LEASE? You must give the car back when a lease has expired, Only a loan requires some kind of upfront payment, You make monthly payments on both, Monthly payments tend to be lower with a lease

You make monthly payments on both

All of the following can happen when you fail to make a mortgage payment EXCEPT: After one missed payment, you can lose your home, You will be charged fees, Your credit score can take a hit, Foreclosure process starts after 30 days of missed payment

After one missed payment, you can lose your home

How are credit cards and debit cards different?

A credit card can offer perks such as purchase protection.

Which statement is true about debit and credit cards? Options: More businesses accept credit cards than debit cards, You get a monthly statement for a credit card, but not for a debit card, Credit cards withdraw money directly from a bank account; debit cards don't, Debit cards withdraw money directly from a bank account; credit cards don't

Debit cards withdraw money directly from a bank account; credit cards don't

Which of the following is a benefit of maintaining a high credit score? - Higher interest rates on loans - Easier approval for rental applications - Increased monthly credit card fees - Limited access to credit products

Easier approval for rental applications

Which of these credit payback strategies would lead to the HIGHEST overall cost? Options: Paying off your credit card bill in full every month, Paying 20% of your credit card balance every month on time, Making the minimum payment (3% of your credit card balance) every month on time, Making the minimum payment (3% of your credit card balance) every month with an occasional late payment

Making the minimum payment (3% of your credit card balance) every month with an occasional late payment

Which of the following statements is CORRECT about secured loans? Options: They are a good choice to use for student loans, If the borrower does not make payments, the lender can repossess the item, In the event of default, the borrower loses nothing except for the down payment, They usually have higher interest rates as compared with unsecured loans

If the borrower does not make payments, the lender can repossess the item

Which of the following actions can negatively impact your credit score? Paying off a loan early, Applying for multiple credit cards in a short period, Keeping credit card balances low, Regularly checking your credit report

Applying for multiple credit cards in a short period

What is the primary purpose of a credit card's grace period?

To provide a period where no interest is charged on new purchases if the balance is paid in full

Taylor is about to go car shopping, and she has $5000 saved that she can use for a down payment while still having extra cash in her emergency fund. She expects the exact model car she’s looking for to cost $35,000. If her top priority is having the lowest monthly payments possible, which advice should she follow? Options: Put in $0 for your down payment, and choose a loan with a short term length, Put in $2500 for your down payment, and choose a loan with a short term length, Put in $3500 for your down payment, and choose a loan with a long term length, Put in $5000 for your down payment, and choose a loan with a long term length

Put in $5000 for your down payment, and choose a loan with a long term length.

If you are having trouble making auto loan payments and are really following a tight budget, which recommendation below represents the WORST advice? Options: Find an extra source of income by taking a second job, working longer hours, or borrowing from family if they can afford to help, Stop making payments on some of your debts so you can focus on getting the most expensive or largest debts under control, Continue making all payments and call your lenders and see if you can negotiate lower monthly payments, lower interest rates, or longer terms, Explore whether a free or non-profit credit counseling service could help

Stop making payments on some of your debts so you can focus on getting the most expensive or largest debts under control

FIN-FL-6-6.1: Based on the Card Statement above, which of the following statements is TRUE? Options: The cardholder is carrying a balance over from the last period. , The cardholder was charged interest on her balances for the last period because she made her payment on time. , If the cardholder makes her minimum payment of $35.00 by the due date, she will NOT be charged interest on her balances. , If the cardholder pays $523.20 by the due date on the bill, she will pay NO interest to the credit card company.

If the cardholder pays $523.20 by the due date on the bill, she will pay NO interest to the credit card company.

FIN-FL-6-6.1: Which of the following statements is TRUE? If you make the minimum payment on your card by the due date, the credit card company will not charge you interest. If you pay your balance in full after the due date, the credit card company will not charge you interest. If you pay your balance in full after the due date, you will be charged interest. If you pay your balance in full by the due date, you will be charged interest.

If you pay your balance in full after the due date, you will be charged interest.

What does a credit score represent?

A number that shows how reliable you are at paying back borrowed money.

What is an interest rate?

The yearly cost of borrowing money, expressed as a percentage of the loan amount.

What is a credit card?

A plastic card that allows you to borrow money from a bank to make purchases and pay it back later.

What does the annual percentage rate (APR) indicate?

The yearly cost of borrowing money, expressed as a percentage of the loan amount.

Amounts of money that you borrow and agree to pay back over time with interest.

What does principle stand for?

the amount of money being borrowed.

time given to pay back the loan.

Types of Credit Flashcards

Student preview

43 questions

Show all answers

1.

FLASHCARD QUESTION

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

2.

FLASHCARD QUESTION

Front

How do banks make money off of the credit they issue?

Back

They charge a high interest rate on the loan.

3.

FLASHCARD QUESTION

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

4.

FLASHCARD QUESTION

Front

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

Back

Auto Loan

5.

FLASHCARD QUESTION

Front

If the collateral for your secured loan can be taken away, why get a secured loan at all?

Back

Because they usually have a lower interest rate

6.

FLASHCARD QUESTION

Front

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

Back

Your level of education

7.

FLASHCARD QUESTION

Front

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

Back

True

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