Credit Review

Front

When considering financial tools for everyday purchases, which of the following statements accurately distinguishes between debit cards, prepaid debit cards, and credit cards?
Debit cards draw money directly from a checking account, while prepaid debit cards use preloaded funds and credit cards borrow money from a credit line.

Back

Debit cards draw money directly from a checking account, while prepaid debit cards use preloaded funds and credit cards borrow money from a credit line.

Front

Which statement accurately reflects a key difference between using a debit card and a credit card?

Back

When you use a debit card, the money is deducted from your bank account immediately, but when you use a credit card, you are borrowing money to be paid back later.

Front

Which of the following is typically associated with a variable interest rate and unsecured borrowing? A mortgage, A personal line of credit, A savings account, A car lease

Back

A personal line of credit

Front

Which of the following is a benefit of making additional principal payments on an amortized loan?

Back

Extra payments toward the principal can reduce the total interest paid over the life of the loan.

Front

When loans are amortized, monthly payments are _____ , while the amount of your monthly payment applied to interest _____ and the amount of your monthly payment applied to the principal _____ over time.

Back

Constant, Decreases, Increases

Front

Which statement accurately describes the difference between fixed-rate mortgages and adjustable-rate mortgages? Options: Adjustable-rate mortgages offer a fixed interest rate for the entire term of the loan, while fixed-rate mortgages have an interest rate that changes with market conditions. Fixed-rate mortgages have an interest rate that remains the same throughout the life of the loan, whereas adjustable-rate mortgages have an interest rate that can change after an initial period. Both fixed-rate and adjustable-rate mortgages have interest rates that change annually based on market conditions. Fixed-rate mortgages are only available for short-term loans, while adjustable-rate mortgages are used for long-term financing.

Back

Fixed-rate mortgages have an interest rate that remains the same throughout the life of the loan, whereas adjustable-rate mortgages have an interest rate that can change after an initial period.

Front

Which credit card repayment method would generally result in the lowest credit score? Options: Paying the full credit card balance before the due date, Paying at least half of the credit card balance each month, Always paying the minimum required amount before the due date, Frequently missing the minimum payment deadline

Back

Frequently missing the minimum payment deadline

Front

If Alex wants to minimize his interest payments over time when buying a car priced at $28,000 with a $7000 down payment, which strategy should he adopt?

Back

Apply the full $7000 as a down payment and secure a loan with a long term length.

Front

When examining the terms for a new credit card, you notice that the APR is advertised as variable, ranging from 12.99% to 19.99%. What does this mean?

Back

The APR will vary based on market conditions, and your rate will fall somewhere in this range.

Front

What is a disadvantage of using a credit card?

Back

It can lead to overspending and debt