Types of Credit Review

Which of the following statements comparing credit and debit cards is TRUE?

• Far more businesses accept credit cards than debit cards

• Credit cards pull money directly from your bank account, while debit cards get their money from Visa or Mastercard

• Credit card companies provide you with a monthly statement, while debit cards do not

• With debit cards, you're spending your own money at point of sale, while with credit cards, you're promising to pay back the money eventually

What financial product am I? I am a type of credit card that requires cardholders to make a security deposit equal to the credit limit on their account. Due to this deposit requirement, I am often a good choice for young people looking to establish a credit history.

• Standard credit card

• Secured credit card

• Store credit card

• Rewards credit card

Which of the following are examples of fixed rate types of credit?

• Small Business Loan

• Auto Loan

• Mortgage

• Credit Card

• Debit Card

Which of these statements best explains why it's often a good idea to pay more than the monthly amount due? Reflect back to our amortization activities.

• Every time you pay extra, the lender will reduce the interest rate they're charging by a small amount

• The extra payment will be applied to the principal amount you owe, which will pay down your debt more quickly

• The extra payment will be applied to the interest you owe, which will reduce the overall cost of your loan

• Amortized loans typically have much higher interest rates than credit cards, so they're the best place to put your extra cash

If you are having trouble making auto loan payments, and are really following a tight budget, which recommendation below represents the WORST advice?

• Find an extra source of income by taking a second job, working longer hours, asking for a raise, etc

• Stop making payments on some of your debts so you can focus on getting the most expensive or largest debts under control

• Continue making all payments and call your lenders and see if you can negotiate lower monthly payments, lower interest rates, or longer terms

• Reduce spending in some other area of your budget so you can direct more funds toward debt payments

When loans are amortized, monthly payments are _______ , while the interest portion of the monthly payment ________ and the principal portion of the monthly payment _______ over time.

• Constant, Increases, Increases

• Constant, Decreases, Increases

• Variable, Decreases, Increases

• Variable, Decreases, Decreases

The shorter your term length, the _______ your monthly payments, and the _______ the total interest you will pay.

• higher, lower

• higher, higher

• lower, lower

• lower, higher

Which of these credit payback strategies would lead to the HIGHEST interest charges?

• Paying off your credit card bill in full every month

• Paying 20% of your credit card balance every month on time

• Making the minimum payment (3% of your credit card balance) every month on time

• Making the minimum payment (3% of your credit card balance) every month with an occasional late payment

Elizabeth is considering buying a $30,000 car. Which of these financing options will likely lead to the LOWEST monthly payment?

• $3000 down payment, 6% interest, 84 months

• $3000 down payment, 6% interest, 60 months

• $0 down payment, 6% interest, 60 months

• $0 down payment, 0% interest, 36 months

You have been working for five years after college and are ready to buy your first home. Homes in the area you want to live in cost $550,000. The biggest mortgage you can afford is $300,000. What is the down payment you will need to pay?

• $0

• $200,000

• $250,000

• $300,000