Types of Credit

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

• 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

Which of the following is NOT a typical type of credit?

• Mortgage

• Overdraft

• Credit Card

• Pre-Paid Debit Card

Which of the following could be a SECURED loan?

• Vacation/Personal Loan

• Student loan

• Mortgage

• Overdraft

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

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

• True

• False

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

• 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

What information on a Schumer Box should you focus on when choosing a credit card?

• The term of the credit card

• Annual Percentage Rate (APR)

• Grace Period

• Fees

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

• 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

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

• You ar charged interest on the remaining balance

• Your credit line is restored to its maximum amount

• Credit card companies have permission to sell your information

• It is the fastest way to pay off your debt

When can personal loans be a better option than credit cards?

• If you want to earn rewards and enjoy travel benefits

• If you want a lower interest rate

• If you want purchase protection & warranties