Test Review-Credit Management

Front

True or false: Credit cards are examples of closed-end credit.

Back

False

Answer explanation

Revolving credit cards are open-end credit.

Open-end credit is a loan from a bank or other financial institution that the borrower can draw on repeatedly, up to a certain pre-approved amount, and that has no fixed end date for full repayment. Open-end credit is also referred to as revolving credit.

Closed-end credit is a loan or type of credit where the funds are dispersed in full when the loan closes and must be paid back by a specific date. Examples: Student loans, car loans, mortages

Front

True or false: Generally speaking, if you have a higher credit score, you will obtain a lower interest rate when you apply for credit.

Back

True

Front

True or false: If you use exactly 50% of your available credit (line of credit), your credit score will increase.

Back

False

Front

A prorated APR of 24% means you will be charged 1.5% each month on large purchases.

Back

False

Answer explanation

24%/12=2%

Front

Define this term: Credit

Back

The use of someone else’s money, borrowed now with the agreement to pay it back later.

Front

Define this term: Debtor

Back

A person or business who borrows money from others.

Front

Define this term: Collateral

Back

Property to assure the repayment of a loan. The creditor may take it away if the debtor fails to make payments.

Front

The smallest amount you can pay each month to keep your credit card in good standing is called the

Back

minimum payment

Front

A __________ is often considered a risky option for emergency cash because it needs to be repaid by your next paycheck and has a high interest rate.

Back

payday loan

Front

To purchase their first home, usually people take out a(n) __________

Back

mortgage