Financial Literacy Quiz

Jessica 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

• All 3 cards are completely the same

The average APR for a payday loan is closest to ...

• 4%

• 14%

• 40%

• 400%

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

• Far more businesses accept credit cards than debit cards

• Credit cards pull money directly from your bank account, while debit cards get their money from Visa or Mastercard

• Credit card companies provide you with a monthly statement, while debit cards do not

• With debit cards, you're spending your own money at point of sale, but with credit cards, you're getting a loan that you need to pay back later

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 on time

• Making the minimum payment (3% of your credit card balance) every month with an occasional late payment

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

• If you need to carry a balance, the interest rates are generally quite low (less than 5%)

• You can make an emergency purchase that you otherwise don’t have the money to pay for right now

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

• You owe the same payment every month

• You must have money deposited into a checking account to use the credit card for purchases

• Making full payments on-time every month is the only way to avoid interest charges

• They do not charge interest

As a young adult, all of the following are good strategies for building credit, EXCEPT:

• Open a credit card, with your parent or guardian as a cosigner

• Take out a payday loan

• Become an authorized user on a credit card used by your parent or guardian

• Open and use a secured credit card

Why are payday loans so much easier to qualify for than traditional bank loans?

• Payday loans are only used by affluent households, and the banks know they have enough money to cover them

• Payday loans are just another word for direct deposit, and almost all employers offer their employees direct deposit instead of a paper paycheck

• Payday loans require proof of employment or other regular income but not a credit check

• Payday loans are typically for such small dollar amounts that no one cares if you repay them or not

Trudy tells her mom that she wants to buy a house within two years of graduating from college. Her mom says Trudy will need a down payment first. What is a down payment?

• A large sum of money you pay when taking out a mortgage so that the principal of your loan is smaller

• A specific type of tax advantaged bank account used for saving money to buy a house

• The first year’s worth of property taxes, held in reserve

• A prepayment to a real estate agent so that they will start helping you house hunt

David has a credit card with a $1000 credit limit. His outstanding balance is currently $800. What is the maximum amount he can now spend on this credit card?

• $200

• $800

• $1000

• $1800