F4 Personal Finance ch2 supp ex

Which of the following are not examples of using consumer credit?

(i)Withdrawing money from a savings account to buy a television set

(ii)Paying for an electronic game by credit card

(iii)Making a deposit at a bank to gain interest

(iv)Paying tuition fees for an evening degree programme with an instalment loan

• 1,2

• 1,3

• 3,4

• 1,2,4

What are the disadvantages of using a credit card?

(i)Not all retail shops accept credit cards.

(ii) Credit cards cannot be used if one does not have money in his bank account.

(iii)Generally, the interest rate on credit cards is higher than that on personal loans.

• 1,2

• 1,3

• 2,3

• 1,2,3

Which of the following is/are (a) correct description(s) of an overdraft account?

• Account holders can only draw a sum not exceeding the account’s current saving balance.

• The main purpose of an overdraft account is to provide a long-term loan to the account holder.

• An overdraft account is a kind of consumer credit.

• B and C

If Peter chooses to buy a DVD player using a personal instalment loan instead of an overdraft account, which of the following is the best possible reason for this decision?

• The instalment loan charges a lower interest rate on late payments.

• The lender of the instalment loan would tolerate non-payment for a longer period of time than the bank offering the overdraft facility.

• Lenders of instalment loans always offer a larger loan amount than those of overdraft facilities.

• Instalment loans offered by some credit card companies may be interest-free.

Which of the following information is usually not mentioned in the credit record of an individual borrower?

• Spending and consumption patterns

• Repayment record

• Borrowing record

• Credit score

Lenders use information from a personal credit database before they decide whether to lend to a new borrower because

• it gives them access to the repayment record of the new borrower.

• they can have a better understanding of the types of loans granted by other lenders to the new borrower.

• they can use the information as an additional reference in assessing the credit standing of the new borrower.

• All of the above

Which of the following is an example of negative personal credit data?

• Mr Chan has applied for a number of credit cards.

• Miss Poon settled her credit card monthly minimum payments on time but did not repay the balance in full.

• Mr Howard delayed payments on a bank loan twice.

• Mr Yip was charged a fine of $1,500 by a court for littering.

Which of the following statements concerning personal credit database is correct?

• Financial institutions offering loans can evaluate the creditworthiness of borrowers using credit reports from the database

• The personal credit database in Hong Kong contains only negative data about an individual.

• Credit applicants cannot benefit from the operation of the database.

• In Hong Kong, individuals cannot check their credit records from the database.

To assess the creditworthiness of new applicants, credit card companies usually consider the applicants’

• family credit history.

• monthly expenses.

• value of assets owned.

• repayment history.

The benefit for borrowers to maintain a good credit record is

• enjoying a higher interest margin on deposits.

• being able to borrow on behalf of their family members.

• being able to borrow on better terms.

• paying less tax.