Theme 4 Test Review

What is credit?

• the amount, including interest, a borrower repays

• the interest paid on an item bought with a credit card

• the cost of interest and fees over the life of the loan

• the report used to decide whether or not to extend a loan

Which of the following do NOT involve interest payments on purchases?

• personal loans

• credit cards

• debit cards

• title loans

Which of the following is a disadvantage of using a credit card?

• the convenience of purchasing now

• the ability to purchase expensive items

• it is widely accepted for payment

• it is subject to interest and fees

Which of the following is NOT addressed by consumer credit laws?

• how a consumer’s credit is collected and used

• information given to consumers upon agreement of loan

• when and where debt collectors can contact consumers

• how much a credit card company can charge in interest

How are credit and debt different?

• Credit is money that has been saved, while debt is money that has been spent.

• Credit refers to money received from one's job, while debt refers to payments one makes to afford goods and services.

• Credit represents money that is available to be borrowed, debt represents money that has been borrowed and must be repaid.

• Credit involves individuals paying interest, while debt involves individuals earning interest

Which of the following has a maximum credit limit that can be used for multiple purchases and can be paid back over time?

• title loans

• credit cards

• mortgage

• paycheck loan

Which of the following is NOT an example of an installment loan?

• mortgage

• auto loan

• debit cards

• student loan

What is the best way to improve a bad credit history?

• apply for additional credit cards

• pay off the lowest interest rate cards first

• use credit cards instead of paying with cash

• pay more than the monthly minimum payment

Which of the following have the highest interest rates?

• payday loans

• personal loans

• credit cards

• student loans

What affects an individual's credit history?

• his or her decisions about loaning others money

• his or her major financial transactions, such as car purchases and rent payments

• his or her important achievements, such as graduating from college and having children

• his or her ability to save money for retirement