Managing Credit Bell Ringer 1

Paying more than the minimum payment (or paying your balance in full) is beneficial because…

• It lowers your interest rate

• The lender can’t penalize you for future late payments

• You get a discount on future purchases made with credit

• You pay less interest overall

If a person with multiple sources of debt has a goal of eliminating one or more of them in as little time as possible, which debt repayment strategy would be best?

• High interest method

• Snowball method

• Stopping payments on all debts but one so you can pay that one off faster

• Making the minimum payment

Which of the following is a type of secured debt in which the item you purchased might be seized if you fail to make payments?

• Auto loan

• Credit card

• Student loan

• Personal loan

Which of these represents a potential consequence of neglecting to pay your federal student loans?

• Wages or tax refunds can be garnished

• Passport revocation

• Driver’s license suspension

• Termination from your job

Which best describes the Debt Snowball method for paying off debt?

• Only make payments on your smallest debt first, then move on to your second smallest debt, and so on

• Once your debt "snowballs" out of control, hire a certified credit counselor to help get your finances back on track

• Make the monthly minimum payments on all your debts, and then put any extra cash toward the debt with the highest balance

• Make the monthly minimum payments on all your debts, and then put any extra cash toward the debt with the lowest balance

What strategy should you use to pay off multiple sources of debt if you want to pay the lowest amount of interest over time?

• Snowball method

• Make minimum payments

• High rate method

• Consolidate multiple debts into one new loan

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

Why is it important to have an emergency fund?

• To cover unexpected expenses without going into debt

• To spend on vacations and luxury items

• To invest in the stock market

• To lend money to friends