Credit Review

Which of the following is a characteristic of secured loans?

• They are ideal for financing vacations

• The lender can take possession of the collateral if payments are missed

• Borrowers only risk losing their initial deposit in case of default

• They typically come with higher interest rates than unsecured loans

What is a common feature of debit cards, prepaid debit cards, and credit cards?

• They all require a credit check to obtain

• They can all be used to make purchases

• They all have the same interest rates

• They all need to be linked to a bank account

What is a key difference between how credit cards and debit cards operate?

• Debit cards offer reward points for purchases, while credit cards do not

• Credit cards require a PIN for transactions, whereas debit cards do not

• Debit cards allow you to spend money you have, while credit cards let you borrow money up to a certain limit

• Credit cards are linked directly to your bank account, while debit cards are not

When reviewing a credit card's Schumer Box, you notice the APR is listed as 12.99% - 25.99%. What does this indicate?

• Most cardholders will automatically receive the lowest APR in the range

• Your APR will fall somewhere within this range, based on your creditworthiness

• Choosing the highest APR in the range is beneficial for earning rewards

• Credit card APRs are fixed and will not change during your card membership

What is a benefit of responsibly using a credit card?

• It guarantees you will never have debt

• It automatically increases your income

• It helps you establish a credit history, which is useful for future financial opportunities

• It eliminates the need for a budget

Credit card terms: "Your payment due date is at least 25 days after the close of the billing cycle. No interest will be charged on new purchases if the previous balance is paid in full by the due date each month." Which statement is accurate?

• Paying only the minimum amount within 25 days will prevent interest charges on new purchases

• Paying the full previous balance after the due date will avoid interest charges on new purchases

• A 25-day period to pay a credit card bill is unusually long

• The period of 25 days after the billing cycle ends is known as the grace period

Which of the following is NOT a recommended way for a young adult to establish a good credit history?

• Apply for a credit card with a parent or guardian as a cosigner

• Use a payday loan service

• Become an authorized user on a parent's credit card

• Utilize a secured credit card responsibly

Which of these credit repayment methods would result in the HIGHEST total interest paid over time?

• Paying off your credit card balance in full each month

• Paying 25% of your credit card balance each month on time

• Making only the minimum payment (3% of your credit card balance) each month on time

• Making only the minimum payment (3% of your credit card balance) each month with frequent late payments

Which of the following is a true statement about credit card usage?

• You are required to pay a fixed amount every month

• You need to have funds in a savings account to make purchases with a credit card

• Paying off your balance in full each month is the only way to avoid paying interest

• Credit cards do not incur any interest charges

Nick has a credit card with a $2000 credit limit. His outstanding balance is currently $800. What is the maximum amount he can now spend on this credit card?

• $800

• $1200

• $2000

• $2800