Types/Managing Credit

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

• From their clients' credit card accounts

• From the Federal government

• From their clients' savings accounts

• From their own money vaults

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!

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

• The loan amount

• Your credit score

• Your education level

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 decreases, so interest lowers

• With each payment, principal increases, so interest lowers

• Banks are legally required to lower interest rates over time

What information on a Schumer Box should you focus on when choosing a credit card? (Choose all that apply)

• The term of the credit card

• Annual Percentage Rate

• Grace Period

• Fees

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

• Always make the full payment on time

• Always make the minimum payment over time

• Pay interest 1st, then pay what you can on leftover balance

• Pay the principal 1st, then pay what you can on interest

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

• You are 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

How can you build a positive credit history as a college student?

• Get a credit card but don't use it to avoid more debt

• Spend up to your credit limit each month

• Become an authorized user on an adult's card

• Make only the minimum payment each month