Free Printable Types of Credit

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Types of Credit - Test Review

Total questions: 40

Worksheet time: 21mins

Name

Class

Date

Shira 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 …

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 the following is most likely to represent a fixed rate, secured debt?

A student loan

A credit card

A prepaid debit card

An 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, or borrowing from family if they can afford to help

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

Explore whether a free or non-profit credit counseling service could help

When loans are amortized, monthly payments are _______ , while the amount of your monthly payment applied to interest ________ and the amount of your monthly payment applied to the principal _______ over time.

Constant, Increases, Increases

Constant, Decreases, Increases

Variable, Decreases, Increases

Variable, Decreases, Decreases

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 throughout the term of the loan

Fixed-rate mortgages have a fixed interest rate for a few years, after which time the interest rate fluctuates according to general market conditions

Adjustable-rate mortgages have a fixed interest rate for a few years, after which time the interest rate fluctuates according to general market conditions

The two mortgages work the same way but are called different names depending if they come from a bank or a credit union

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

10.

Denise took out a payday loan for $300 in August. By February of the next year, she was able to pay back the loan, but she had spent a total of $750 doing so. What’s the most likely story of how this happened?

The minimum monthly payment for payday loans is usually only $10 or $15, so a lot of interested accumulated

Upfront, Denise knew there would be $450 of fees attached to the loan, but she took out the loan anyway

Payday loans must be paid in full within two weeks, and if not, the only option is to renew the loan for a high penalty fee, which she did approximately 12 times

Denise not only paid the $300 she owed, but she prepaid an extra $450 in case she needs another loan in upcoming months

11.

Taylor is about to go car shopping, and she has $5000 saved that she can use for a down payment while still having extra cash in her emergency fund. She expects the exact model car she’s looking for to cost $35,000. If her top priority is having the lowest monthly payments possible, which advice should she follow?

Put in $0 for your down payment, and choose a loan with a short term length

Put in $2500 for your down payment, and choose a loan with a short term length

Put in $3500 for your down payment, and choose a loan with a long term length

Put in $5000 for your down payment, and choose a loan with a long term length

12.

Reading through a credit card’s 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

In this case, you want the highest APR in the range because you’ll earn more

The APR on credit cards is usually fixed, so it won't be adjusted as long as you are a cardholder

13.

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

14.

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

25 days is an exceptionally long period without paying a credit card bill

The 25 days after the end of the billing cycle is referred to as the grace period

15.

A loan with a shorter term length will have __________ monthly payments, and you will pay __________ in total interest.

higher, less

higher, more

lower, less

lower, more

16.

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

17.

Which of the following statements is CORRECT about secured loans?

They are a good choice to use for student loans

If the borrower does not make payments, the lender can repossess the item

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

18.

An excellent credit score will help with which aspect of car financing?

Bargaining for a great sales price

Receiving a large down payment

Qualifying for a low interest rate

Having a wide selection of term lengths

19.

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

20.

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

Amy made a larger down payment, so her monthly payments are also larger

Chuck chose a shorter term for his mortgage, so his monthly payments are also lower

Chuck has a lower credit score, so his interest payments are also lower

21.

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

22.

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

23.

Duc 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

24.

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%

A 28.99% APR may be applied to your account for late payment

25.

Why would credit card companies prefer that their cardholders make the minimum monthly payment every month rather than paying their total balance in full?

This is required by federal law for tax purposes

This allows the card holder to pay their bill quickly and close the card when they’re ready

This enables the credit card company to make more money

This helps cardholders develop financial independence

26.

True or False: A cosigner's credit history can be affected by the loan they are cosigned on.

True

False

27.

Why does the amount of INTEREST you owe on a loan decrease over time?

The institution trusts you more, so they lower the interest

With each payment, principal increases; so interest lowers

Banks are legally required to lower interest rates over time

With each payment, principal decreases, so interest lowers

28.

What is the purpose of a Schumer box when applying for a credit card?

It summarizes information like interest rates, fees, and grace periods

It summarizes how much interest you have accrued in the last 90 days

It gives a detailed explanation of your credit history

It tracks your spending habits to help you find ways to budget your money

29.

Which of the following is TRUE about an auto LOAN and a LEASE?

You must give the car back when a lease has expired

Only a loan requires some kind of upfront payment

You make monthly payments on both

Monthly payments tend to be lower with a lease

30.

All of the following can happen when you fail to make a mortgage payment EXCEPT:

After one missed payment, you can lose your home

You will be charged fees

Your credit score can take a hit

Foreclosure process starts after 30 days of missed payment

31.

A variable-rate is when...

the interest rate can change during the duration of the loan

the interest rate remains constant/the same during the duration of the loan

32.

A fixed-rate is when...

the interest rate can change during the duration of the loan

the interest rate remains constant/the same during the duration of the loan

33.

An open line of credit that can be used for any purchases is

Secured Debt

Unsecured Debt

34.

A credit card offer comes in the mail with the bold print "0% A.P.R. for New Accounts." Which important piece of information should you find before thinking about signing up?

Can I get two or more cards with this offer?

What is the A.P.R. after the introductory period?

What kind of designs can I get on my card?

35.

Principal is the amount you're _______________.

buying

borrowing

time you have to pay it back

36.

Interest is

the percentage the bank charges you for lending you the money

the amount you're borrowing

the time you hvae to pay it back

37.

Term is

the amount you're borrowing

the time you have to pay the loan back

the person you're signing the loan with

The name of the type of loan you're applying to receive.

38.

Each of the following financial products will help you build credit history EXCEPT:

Secured credit card

Debit card

Credit card

39.

Which of the following is a characteristic of installment credit?

Varying interest rates depending on the repayment history.

A continuous loan the borrower has to repay with a revolving balance.

Make equal payments on a regular basis until the loan is repaid.

Terms that last days instead of years.

40.

How are home loans and auto loans alike?

You risk the loss of these assets if you are unable to pay.

They require higher interest payments than credit cards.

The annual percentage rate is charged as compound interest on your balance.

No interest is ever charged on your principal.

100 %

Types of Credit - Test Review

Total questions: 40

Worksheet time: 21mins

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