Chapter 25. The Basics of Credit

The annual percentage rate on a credit card determines _.

• The amount of interest you are charged on credit card purchases.
• The amount your credit limit can go up within a year
• How many credit cards that you can own

Which term refers to a person who lends money or provides credit?

• debtor
• consumer
• creditor
• borrower

Which term could be used to refer to the use of credit by a manufacturer to finance the development of a energy-efficient truck?

• commercial credit
• consumer credit
• military spending
• government spending

Which is a factor that contributes to a good credit rating?

• avoiding the use of credit
• reaching your credit limit
• using credit in an emergency
• paying bill on time

Which is NOT an advantage of using credit?

• traveling without large amounts of cash
• handling emergency financial needs
• committing future income to debt repayment
• contributing to the growth of the economy

Which might cause your credit rating to be lowered?

• using credit in an emergency
• paying late or missing payments
• using savings instead of credit
• putting off purchases for a while

Which is something you should consider before using credit to finance a major purchase?

• What is the difference between commercial and consumer credit
• What are the costs of using credit to make this purchase?
• Will the purchase contribute to economic growth?
• Have you recently used credit to make other purchases?

Which might be obtained from a department store?

• a charge account
• a credit card
• a travel and entertainment card
• a credit union account

Which depends on the degree of risk a creditor takes in lending money or selling on credit?

• whether the loan is short-term or long-term
• whether the borrower makes full or partial payment
• the use of a credit card or charge account
• the cost of the credit to the borrower

Which is NOT a way credit card companies earn money?

• late fees and penalities
• annual fees
• interest
• sales taxes