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WorksheetsTypes of Credit Review
Total questions: 15
Worksheet time: 8mins
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, while with credit cards, you're promising to pay back the money eventually
What financial product am I? I am a type of credit card that requires cardholders to make a security deposit equal to the credit limit on their account. Due to this deposit requirement, I am often a good choice for young people looking to establish a credit history.
Standard credit card
Secured credit card
Store credit card
Rewards credit card
Which of the following are examples of fixed rate types of credit?
Small Business Loan
Auto Loan
Mortgage
Credit Card
Debit Card
Which of these statements best explains why it's often a good idea to pay more than the monthly amount due? Reflect back to our amortization activities.
Every time you pay extra, the lender will reduce the interest rate they're charging by a small amount
The extra payment will be applied to the principal amount you owe, which will pay down your debt more quickly
The extra payment will be applied to the interest you owe, which will reduce the overall cost of your loan
Amortized loans typically have much higher interest rates than credit cards, so they're the best place to put your extra cash
If you are having trouble making auto loan payments, and are really following a tight budget, which recommendation below represents the WORST advice?
Find an extra source of income by taking a second job, working longer hours, asking for a raise, etc
Stop making payments on some of your debts so you can focus on getting the most expensive or largest debts under control
Continue making all payments and call your lenders and see if you can negotiate lower monthly payments, lower interest rates, or longer terms
Reduce spending in some other area of your budget so you can direct more funds toward debt payments
When loans are amortized, monthly payments are _______ , while the interest portion of the monthly payment ________ and the principal portion of the monthly payment _______ over time.
Constant, Increases, Increases
Constant, Decreases, Increases
Variable, Decreases, Increases
Variable, Decreases, Decreases
The shorter your term length, the _______ your monthly payments, and the _______ the total interest you will pay.
higher, lower
higher, higher
lower, lower
lower, higher
Which of these credit payback strategies would lead to the HIGHEST interest charges?
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
Elizabeth is considering buying a $30,000 car. Which of these financing options will likely lead to the LOWEST monthly payment?
$3000 down payment, 6% interest, 84 months
$3000 down payment, 6% interest, 60 months
$0 down payment, 6% interest, 60 months
$0 down payment, 0% interest, 36 months
You have been working for five years after college and are ready to buy your first home. Homes in the area you want to live in cost $550,000. The biggest mortgage you can afford is $300,000. What is the down payment you will need to pay?
$0
$200,000
$250,000
$300,000
Reading through a credit card disclosure (aka the Schumer Box), you see the APR for a specific card is set at 9.99% - 23.99%. Which statement is true?
When given a range of APRs like this, you can assume most cardholders pay the lowest rate listed
Your APR will be within that range, depending on the strength of your credit history
With credit card APRs, cardholders like higher APRs because they earn more
The APR on credit cards is usually fixed so it won't be adjusted as long as you are a cardholder
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%)
If you pay off your balances every month in full, it's like getting a short-term interest-free loan
Which of the following statements is CORRECT about secured loans?
They are an example of a credit card
They require collateral, in the form of assets like a car or a home, to be exchanged for the loan
In the event of default, the borrower loses nothing except for the down payment
They usually have higher interest rates as compared with unsecured loans
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
Open a checking account, and start using a debit card
Become an authorized user on a credit card used by your parent or guardian
Open and use a secured credit card
Each of the following financial products will help you build a credit history EXCEPT...
Secured credit card
Debit card
Auto loan
Credit card
