Unit 6: Managing Credit

Shira is trying to decide between getting a debit card, a prepaid debit card, and a credit card. Which statement is true?

• All 3 cards are completely different
• Debit cards and prepaid debit cards are the same
• Debit cards and credit cards are the same
• All 3 cards are completely the same

The average APR for a payday loan is closest to …

• 4%
• 14%
• 40%
• 400%

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, but with credit cards, you're getting a loan that you need to pay back later

Which of the following is most likely to represent a fixed rate, secured debt?

• A student loan
• A credit card
• A prepaid debit card
• An auto loan

Which of these statements best explains why it's often a good idea to pay more than the monthly amount due on an amortized loan?

• 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

What are the two most important factors in calculating your credit score?

• Payment history and types of accounts
• Amounts owed and length of credit history
• Payment history and total debt
• Length of credit history and new credit inquiries

Heather realized she has taken out too much debt and it has started to negatively impact her ability to budget. She has decided to pay off this debt in full as soon as possible. All of the following would be beneficial strategies EXCEPT…

• Reducing spending by canceling some of her streaming subscriptions
• Taking extra shifts at work to increase her income
• Making more than the minimum required payment on her debt
• Applying for another credit card to use in case she runs out of cash paying off her debt

Which of the following statements about credit scores does this bar graph support?

• Credit scores tend to drop as you grow older because you are more likely to miss a payment at some point
• It is more difficult for young people to borrow because they have less payment history for a lender to rely upon
• When young people borrow, they are likely to have lower interest rates because their credit scores are lower
• It is easier for young people to get loans at lower interest rates because they are likely to have never been late with a payment

All of the following would show up on a credit report EXCEPT...

• Salary of your current job
• Payment history of your car loan
• Credit card payment history
• Student loan activity

Which of the following methods of getting your credit score would involve paying a fee?

• Checking your credit card or loan statement
• Talking to a non-profit counselor
• Checking creditkarma.com
• Getting a score from myFICO.com