Unit 5 - Credit 1 and 2

Which of the following is true about credit cards?

• You have to pay interest on all your purchases

• All credit cards have an annual fee

• It is the easiest way to establish credit

Which of the following is an advantage of using a credit card?

• If you carry a balance, the interest rate is extremely low (less than 5%)

• If you pay off your balance every month in full, it is similar to a short-term interest-free loan

• Since it is tied directly to your checking account, it prevents you from spending money you don't have

___ can be used repeatedly for purchases that will be paid back monthly.

• Cash Advance

• Closed-End Credit

• Open-End Credit

It is recommended that your monthly loan payments (INCLUDING mortgage) should not be over what % of your GROSS monthly income?

• 10%

• 16%

• 36%

Interest is not charged by the credit card company if you pay your balance in full by the due date.

• True

• False

Secured loans typically have a higher interest rate than unsecured loans

• True

• False

When would a variable rate loan be the most dangerous to consumers?

• When interest rates fall

• When interest rates stay the same

• When interest rates rise

Which type of loan has principal payments "built in" so at the end of the loan term there is nothing further owed.

• Amortized Loan

• Open-Ended Credit

• Interest-only loan

What is true about a variable interest rate mortgage

• The interest rate varies during the length of the loan

• It can also be called an ARM loan (Adjustable Rate Mortgage)

• Both A and B

• Neither A or B

The interest rate (including any fees) you pay on financed purchases on your credit card is know as the

• Annual membership Fee (AMF)

• Variable Rate Period (VRP)

• Annual Percentage Rate (APR)