Types of Credit

Mia is applying for a new credit card and comes across a Schumer box. What is the purpose of a Schumer box in this context?

• It summarizes information like interest rates, fees, and grace periods

• It summarizes how much interest Mia has accrued in the last 90 days

• It gives a detailed explanation of Mia's credit history

• It tracks Mia's spending habits to help her find ways to budget her money

Maya wants to purchase a car and is considering taking a loan. Which of the following loan types is typically a SECURED loan that she can consider?

• Auto Loan

• Student loan

• Credit Card Balance

• Overdraft

What is the purpose of a Schumer box in credit card applications?

• To summarize important information such as interest rates and fees

• To track the cardholder's spending habits

• To provide a detailed explanation of the cardholder's credit history

• To calculate the cardholder's credit score

Lily is considering taking a secured loan for her new car. If the car can be taken away as collateral, why should she opt for a secured loan?

• Because they usually have a higher interest rate

• Because they usually have a lower interest rate

• Banks give you an extra 90 days to make a missed payment

• Banks typically don't charge interest for the first 12 months

What is true about Payday loans?

• You can pay them back in installments

• You are charged a 1-time fee for the loan

• Most people successfully pay these loans back

• You need a credit card account to get one

Harper recently got a credit card and wants to avoid paying interest on it. What should Harper do to achieve this?

• Always make the minimum payment over time

• Pay interest 1st, then pay what you can on leftover balance

• Always make the full payment on time

• Pay the principal 1st, then pay what you can on interest

Mason wants to take out a loan from a bank to buy a car. How does the bank make money off of the credit they issue to Mason?

• They charge a large, one-time fee at the start of the loan

• They take out a small fee each month from Mason's checking account

• They charge a high interest rate on the loan

• This is a trick question - they DON'T make money!

Lily wants to take a loan for her new car. Where do banks get the money to lend out to consumers like Lily?

• From their clients' credit card accounts

• From their clients' savings accounts

• From the Federal government

• From their own money vaults

Aria, Kai, and David are discussing their student loans. Aria mentions that federal student loans differ from private student loans. David is confused and asks, 'How do federal student loans differ from private student loans?'

• Federal loans have fewer and less flexible repayment options

• Federal loans generally have higher interest rates

• Private loan repayment may start while you're in school

• Private loans don't require a cosigner, federal loans do

James and Priya are discussing whether to use a personal loan or a credit card for their upcoming expenses. In which situations can personal loans be a better option than credit cards? (hint: choose 2 correct answers)

• If they want to earn rewards and enjoy travel benefits

• If they want a lower interest rate

• If they want purchase protection & warranties

• If they want to increase their credit score