WorksheetsTypes of Credit - Unit Review
Total questions: 25
Worksheet time: 13mins
Name
Class
Date
1.
1. Shira is trying to decide between getting a debit card, a prepaid debit card, and a credit card. Which statement is true?
a)
All 3 cards are completely different
b)
Debit cards and credit cards are the same
2.
2. The average APR for a payday loan is closest to …
a)
4%
b)
400%
3.
3. Which of the following statements comparing credit and debit cards is TRUE?
a)
Credit cards pull money directly from your bank account, while debit cards get their money from Visa or Mastercard
b)
Debit cards, you're spending your own money, but with credit cards, you're getting a loan that you need to pay back later
4.
4. Which of the following is most likely to represent a fixed rate, secured debt?
a)
A credit card
b)
An auto loan
5.
5. 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?
a)
The extra payment will be applied to the principal amount you owe, which will pay down your debt more quickly
b)
The extra payment will be applied to the interest you owe, which will reduce the overall cost of your loan
6.
6. If you are having trouble making auto loan payments and are really following a tight budget, which recommendation below represents the WORST advice?
a)
Find an extra source of income by taking a second job, working longer hours, or borrowing from family if they can afford to help
b)
Stop making payments on some of your debts so you can focus on getting the most expensive or largest debts under control
7.
7. 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.
a)
Constant, Decreases, Increases
b)
Variable, Decreases, Decreases
8.
8. Which of the following is true about fixed and adjustable-rate mortgages?
a)
Adjustable-rate mortgages have a fixed interest rate for a few years, after which time the interest rate fluctuates according to general market conditions
b)
The two mortgages work the same way but are called different names depending if they come from a bank or a credit union
9.
9. Which of these credit payback strategies would lead to the HIGHEST overall cost?
a)
Making the minimum payment (3% of your credit card balance) every month on time
b)
Making the minimum payment (3% of your credit card balance) every month with an occasional late payment
10.
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?
a)
Upfront, Denise knew there would be $450 of fees attached to the loan, but she took out the loan anyway
b)
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
11.
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?
a)
Put in $0 for your down payment, and choose a loan with a short term length
b)
Put in $5000 for your down payment, and choose a loan with a long term length
12.
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?
a)
Your APR will be within that range, depending on the strength of your credit history
b)
In this case, you want the highest APR in the range because you’ll earn more
13.
13. What is an advantage of using a credit card?
a)
Since it is tied directly to your checking account, it prevents you from spending money you do not have
b)
You can make an emergency purchase that you otherwise don’t have the money to pay for right now
14.
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.
a)
25 days is an exceptionally long period without paying a credit card bill
b)
The 25 days after the end of the billing cycle is referred to as the grace period
15.
15. A loan with a shorter term length will have __________ monthly payments, and you will pay __________ in total interest.
a)
higher, less
b)
lower, more
16.
16. Select the statement below that accurately describes a characteristic of a credit card.
a)
Making full payments on-time every month is the only way to avoid interest charges
b)
They do not charge interest
17.
17. Which of the following statements is CORRECT about secured loans?
a)
If the borrower does not make payments, the lender can repossess the item
b)
In the event of default, the borrower loses nothing except for the down payment
18.
18. An excellent credit score will help with which aspect of car financing?
a)
Receiving a large down payment
b)
Qualifying for a low interest rate
19.
19. As a young adult, which is a good strategy for building credit?
a)
Take out a payday loan
b)
Open and use a secured credit card
20.
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?
a)
Amy chose a shorter term for her mortgage, so her monthly payments are higher
b)
Chuck has a lower credit score, so his interest payments are also lower
21.
21. Why are payday loans so much easier to qualify for than traditional bank loans?
a)
Payday loans are only used by affluent households, and the banks know they have enough money to cover them
b)
Payday loans require proof of employment or other regular income but not a credit check
22.
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)
A large sum of money you pay when taking out a mortgage so that the principal of your loan is smaller
b)
The first year’s worth of property taxes, held in reserve
23.
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?
a)
$200
b)
$1800
24.
24. Which of the following statements is true about this Schumer Box?
a)
You will never be charged an APR higher than 14.99%
b)
A 28.99% APR may be applied to your account for late payment
25.
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?
a)
This enables the credit card company to make more money
b)
This helps cardholders develop financial independence
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