credit Case Studies

Multiple Choice

Jake is a college freshman who just received an offer for a credit card with a $2,000 limit. The card has a 24% interest rate and offers 1% cash back on all purchases. Jake is tempted to use it to buy a new gaming console and furniture for his dorm. He currently has a part-time job but doesn’t have much savings. What is the best financial decision for Jake?

• Accept the offer and use the card for the purchases since he can pay the minimum balance each month.

• Accept the card but only use it for emergencies and pay off the full balance each month.

• Decline the credit card offer and save up for the purchases instead.

• Accept the offer and open another credit card to increase his credit limit.

Multiple Choice

Maria just graduated from college and got her first job. She needs a car to get to work, and a dealership offers her a loan for a brand-new car at 8% interest for 60 months. Her monthly payment would be $450. However, she has an option to buy a reliable used car for $8,000 outright using her savings. What should Maria do?

• Take the loan for the new car because she deserves a nice vehicle after graduating.

• Buy the used car with cash and avoid monthly payments.

• Take the loan but make minimum payments to keep extra cash for other expenses.

• Lease a brand-new car instead since she won’t own it.

Multiple Choice

Alex wants to rent an apartment, but the landlord requires a credit check. Alex never had a credit card or loan before, so he doesn’t have a credit history. The landlord is hesitant to rent to him without a credit score. What is the best way for Alex to establish credit responsibly?

• Open a secured credit card and pay off the balance in full each month.

• Take out a payday loan to build credit quickly.

• Get several store credit cards and use them often.

• Ignore credit and only pay for things with cash.

Multiple Choice

Chris's car breaks down unexpectedly, and the repairs will cost $1,500. He doesn’t have enough in savings but has a credit card with a $2,000 limit and an 18% interest rate.

• Charge the full repair cost to his credit card and pay it off over time.

• Take out a payday loan to cover the cost.

• Negotiate a payment plan with the repair shop and try to cover the cost with savings.

• Open a new credit card with a higher limit.

Multiple Choice

Jessica is a high school senior choosing between two colleges. One offers a full scholarship, while the other is her dream school but will require her to take out $50,000 in student loans. What should Jessica consider before making a decision?

• Take out the student loans because she can always pay them back later.

• Go to the school that offers the full scholarship to avoid debt.

• Use credit cards to pay for the difference so she doesn’t need loans.

• Take out loans and ignore the interest rate since it won’t matter until after graduation.

Multiple Choice

Brian’s rent is due in two days, but he is $300 short. He sees a payday loan store advertising "Quick Cash – No Credit Check!" They offer him a $300 loan, but he must repay $360 in two weeks. Brian gets paid biweekly but already struggles to cover expenses. What is Brian’s best option?

• Take the payday loan since it's a short-term solution.

• Borrow the money from a friend or family member and pay it back interest-free.

• Take the payday loan and roll it over if he can’t pay it off in two weeks.

• Take out a credit card cash advance since it has a higher limit.

Multiple Choice

Samantha owns her car outright, but she needs $1,000 to cover unexpected medical expenses. A title loan company offers her a loan using her car as collateral, with a 300% APR. If she misses a payment, they can take her car. What should Samantha do?

• Take the title loan and pay it back as soon as possible.

• Sell something valuable or work extra hours to come up with the money.

• Take the title loan and refinance it if she struggles to repay it.

• Get a second title loan from another company to cover payments if needed.

Multiple Choice

Kevin is shopping for new clothes when the cashier offers him a store credit card with 15% off his purchase. The card has a 28% interest rate, and Kevin currently has no credit card debt. What should Kevin do?

• Accept the card and use it for all his shopping to maximize savings.

• Accept the card, use it for the discount, then pay off the balance immediately.

• Decline the card because store credit cards often have high interest rates.

• Accept the card and only pay the minimum balance each month.

Multiple Choice

Mark has $5,000 in credit card debt at 22% interest. He receives an offer to transfer his balance to a new credit card with 0% interest for 12 months, but after that, the rate jumps to 25%. There’s also a 3% balance transfer fee. What should Mark do?

• Transfer the balance but make sure he pays it off before the promotional period ends.

• Transfer the balance and only make minimum payments.

• Keep his current card since balance transfers always hurt credit scores.

• Take out a personal loan with a fixed interest rate to pay off the credit card.

Multiple Choice

Emily wants to furnish her apartment and finds a store offering “0% interest for 24 months” on furniture financing. However, if she misses a payment, the full 24 months of interest (at 29%) will be added to her balance retroactively. What should Emily do?

• Finance the furniture since it’s interest-free and she can make payments.

• Read the fine print and make sure she can afford to pay it off in time.

• Finance the furniture but only pay the minimum amount due each month.

• Use a credit card instead since it has a lower interest rate.