Using Credit

What is credit?

• A system of direct payment for goods and services

• The ability to borrow money from someone else with the agreement to pay it back later

• A legal document that records a transaction

• A type of currency

Who lends credit?

• Debtors

• Creditors, also known as lenders, persons, businesses, and service providers

• Borrowers

• Financial advisors

What is a debtor?

• A person who lends money to others

• A person who saves money in a bank

• A person who borrows money from others

• A person who invests money in stocks

What must you first do to use credit?

• Pay off your current debt

• Qualify for credit

• Assess your capital

• Plan your finances

What could happen if you are spending more than you are making?

• You could qualify for more credit

• You could bring on a lot of debt

• Your capital wealth will increase

• You will have to decrease your income

What is capital wealth?

• The amount of credit you can take

• The money you bring in every month

• The form of money or other assets owned by a person after deducting debts

• The total amount of your monthly payments

What is one of the advantages of using credit?

• It has no fees or finance charges.

• It is ideal for purchasing goods and services.

• It increases the risk of overspending.

• It cannot help in emergencies.

Which of the following is a disadvantage of using credit?

• It helps build your credit score.

• It is safer to carry around than large sums of cash.

• Credit can cause financial issues if used poorly due to overspending.

• It helps in emergencies when you may need money that you don't have.

What is Revolving Credit?

• A one-time loan that must be repaid over a fixed period

• Credit that you can borrow on an ongoing basis with interest rates, a spending limit, and monthly payments

• A financial service offered only to businesses for large purchases

• A type of savings account with a high interest rate

Which of the following is an example of Open Credit?

• Mortgage

• Car loan

• Cell phone bill

• Student loan