Credit Unit Quiz

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

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

If you are having trouble making auto loan payments and are really following a tight budget, which recommendation below represents the WORST advice?

• Find an extra source of income by taking a second job, working longer hours, or borrowing from family if they can afford to help

• Stop making payments on some of your debts so you can focus on getting the expensive or largest debts under control

• Continue making all payments and call your lenders and see if you can negotiate

When loans are amortized, monthly payments are _______, while the amount of your monthly payment applied to interest _______ and the amount of your monthly payment applied to the principal _______ over time.

• Constant, Increases, Increases

• Constant, Decreases, Increases

• Variable, Decreases, Increases

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

Which of the following is true about fixed and adjustable-rate mortgages?

• Fixed-rate mortgages have a fixed interest rate for a few years, after which time the interest rate fluctuates according to general market conditions

• Adjustable-rate mortgages have a fixed interest rate for a few years, after which time the interest rate fluctuates according to general market conditions

• The two mortgages work the same way but are called different names depending if they come from a bank or a credit union

Which of these credit payback strategies would lead to the HIGHEST overall cost?

• Paying off your credit card bill in full every month

• Paying 20% of your credit card balance every month on time

• Making the minimum payment (3% of your credit card balance) every month with an occasional late payment

Taylor is about to go car shopping, and she has $5000 saved that she can use for a down payment while still having extra cash in her emergency fund. She expects the exact model car she's looking for to cost $35,000. If her top priority is having the lowest monthly payments possible, which advice should she follow?

• Put in $0 for your down payment, and choose a loan with a short term length

• Put in $3500 for your down payment, and choose a loan with a long term length

• Put in $5000 for your down payment, and choose a loan with a long term length

Reading through a credit card's Schumer Box, you see the APR for a specific card is set at 8.99% - 14.99%. Which statement is true?

• Your APR will be within that range, depending on the strength of your credit history

• In this case, you want the highest APR in the range because you'll earn more

• The APR on credit cards is usually fixed, so it won't be adjusted as long as you are a cardholder

What is an advantage of using a credit card?

• It will not affect your credit score or credit history

• Since it is tied directly to your checking account, it prevents you from spending money you do not have

• You can make an emergency purchase that you otherwise don't have the money to pay for right now