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WorksheetsTypes of Credit
Total questions: 25
Worksheet time: 13mins
Each of the following financial products will help you build a credit history EXCEPT...
Secured Credit card
Debit Card
Auto Loan
Credit Card
Which of the following statements below is TRUE?
The cardholder is carrying a balance over from the last period.
The cardholder was charged interest on her balances for the last period because she made her payment on time.
If the cardholder makes her minimum payment of $35.00 by the due date, she will NOT be charged interest on her balances.
If the cardholder pays $523.20 by the due date on the bill, she will pay NO interest to the credit card company.
Based on her current balance, how much credit does this cardholder have available to use?
$0
About $500
About $1,600
$2,100
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
Overdraft Credit Card
Rewards Credit Card
Which of the following is most likely to represent a fixed rate, secured debt?
A student loan
A credit card
A loan from a friend
A dealer-financed auto loan
Which of these statements best explains why it's often a good idea to pay more than the monthly amount due on an amortized loan?
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
If you don’t proactively choose a different repayment plan option, your Federal student loans will default to the Standard Plan, which has a term of __________.
5%
10%
5 Years
10 Years
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 the following is true about fixed and adjustable-rate mortgages?
Fixed-rate mortgages have a constant payment every month, but an interest rate that increases during the term of the loan
They work the same way but are called different names depending if they come from a bank or a credit union
Fixed-rate mortgages have a fixed interest rate for a short period, but then the interest rate fluctuates, which can lead to higher or lower interest rates for the homeowner
Adjustable-rate mortgages have a fixed interest rate for a short period, but then the interest rate fluctuates, which can lead to higher or lower interest rates for the homeowner
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
Credit card disclosure: "Your due date is at least 25 days after the end of the billing cycle. We will not charge you interest on new purchases provided that you have paid your previous balance in full by the due date each month." Identify the true statement.
If you make the minimum payment on your card within the 25 day period, the credit card company will not charge you interest
If you pay your previous balance in full after the due date, the credit card company will not charge you interest
If you make your credit card payment before the due date, you will be charged interest regardless of the amount of your payment
The 25 days after the end of the billing cycle is referred to as the grace period
You see on a commercial that OrangeCo is offering a credit card with a 5% cash back program for all cardholders. What is ONE question you might ask to evaluate how good this offer is?
Can I choose the picture that is on the front of my credit card?
Can I get a debit card along with a new credit card?
Who does OrangeCo use as their spokesperson in the commercial?
Is there an annual fee on this credit card and how much is it?
Amy and Chuck each buy a house in the same neighborhood for $250,000. Amy's monthly mortgage payment is $400 more per month than Chuck's. Which one of the following statements could explain this difference?
Amy chose a shorter term for her mortgage, so her monthly payments are higher.
Chuck has a lower credit score, so his interest payments are also lower.
Amy made a larger down payment, so her monthly payments are also larger.
Chuck made a larger down payment, so his monthly payments are larger.
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
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
What is one benefit of selecting an income-based repayment plan for your student loans?
If you take a job that pays a low income, you will never have to pay any of your student loans
Your student loan interest rate will fluctuate based on how much you’ve earned in the previous year
Your monthly loan payment will be set based on your income, so that you’re not paying more than 20% of income toward your loans
The total loan amount will be decreased to meet your starting salary at your first post-college job
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
Which of the following statements is true about this Schumer Box?
Depending on your creditworthiness, the APR for a borrower will always either be 8.99%, 10.99% or 12.99%
There is an introductory APR that is valid only for 1 year, but then the permanent APR is lower than that at 8.99%.
You will never be charged an APR higher than 14.99%
You may be charged an APR as high as 28.99% for a late payment
