HS 101 - Types of Credit

Where do banks get the money to lend out to consumers?

• From their clients' credit card accounts

• From their clients' savings accounts

• From the Federal government

• From the interest they get from loans

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

• This is a trick question - they DON'T make money!

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? (hint: choose 2 correct answers)

• Auto loan

• Student loan

• Mortgage

• Overdraft

If the collateral for your secured loan can be taken away, why get a secured loan at all?

• Because they usually have a higher interest rate

• Because they usually have a lower interest rate

• Banks give you an extra 90 days to make a missed payment

• Banks typically don't charge interest for the first 12 months

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? (hint: choose 3 correct answers)

• 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