Unit 4 Test - Credit

First Name

Last Name

1) What is one benefit of borrowing money from a friend or family member instead of from the bank?

• You don't have to repay your friends or family if you don't want to
• You can borrow more money from a friend or family member because they have more cash than banks
• Friends and family cannot legally charge you interest on the loan, but banks can
• Friends and family will typically work with you to set up a repayment plan you can afford

2) Justin really wants to attend the 8th-grade graduation ceremony, dance, and party, but all the tickets combined cost $75, and he doesn't have that much. Justin has no job, gets no allowance, and he is not expecting money any time soon. What's a risk of asking his friend, Kylie, for a loan?

• Kylie will have to give him the money, even if she doesn't want to
• As soon as she lends him the money, they won't be able to be friends any more
• It might cause problems in their friendship if Justin doesn't repay her on time

• The school won't sell him tickets if they know he borrowed the money

3) What is the key difference between a credit card and a debit card?

• Credit cards are a loan, and debit cards take money straight from your own checking account
• Wealthy people use credit cards, while people with lower incomes use debit cards
• Credit cards come from credit unions, while debit cards come from banks
• You can only use credit cards if you are over 25, but you can use debit cards as long as you are over 18

4) Craig isn't sure if he should open up a credit card account or get a bank loan. What question is MOST useful in helping him decide which financial product he should get?

• Are you responsible with your money?
• Are you going to make many small purchases over time, or, one large purchase?
• Are you using the money to purchase an item that is a need or a want?
• How much money do you have in your bank account?

5) Kevin really wants to buy a new bike because his old one is too small now. He's trying to decide if he should use his debit card or credit card. What's one reason he should be careful about using credit?

• Credit will take the money from his checking account, lowering his bank balance
• Credit will force him to pay taxes on his bike purchase
• Credit will charge him interest every month until he repays his full balance
• Credit will force him to buy a cheaper bike than he could with debit

6) Which statement about credit card interest rates is TRUE?

• The more money you spend on purchases, the higher your interest rate will be
• A high interest rate means you'll pay MORE money total
• A high interst rate means you'll pay LESS money total
• Most credit cards do not charge any interest rate

7) Which age group has the most credit card debt?

• Young adults
• Middle-aged people
• Senior citizens
• Credit card debt is evenly distributed among all age groups

8) What is the best way to avoid a large debt on your credit card?

• Avoid paying the bill every month so your bank account stays high
• Pay the minimum monthly payment on time every month
• Pay half your balance every month
• Pay your full balance every month