Types of Credit - Unit Test

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

Which of the following statements comparing credit and debit cards is TRUE?

• Far more businesses accept credit cards than debit cards
• Credit card companies provide you with a monthly statement, while debit cards do not
• With debit cards, you're spending your own money, but with credit cards, you're getting a loan that you need to pay back later

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?

• 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

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 most expensive or largest debts under control

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

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

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

A loan with a shorter term length will have __________ monthly payments, and you will pay __________ in total interest.

• higher, less
• lower, more

Select the statement below that accurately describes a characteristic of a credit card.

• You owe the same payment every month
• Making full payments on-time every month is the only way to avoid interest charges
• They do not charge interest