WorksheetsUsing Credit
Total questions: 35
Worksheet time: 18mins
What is credit?
A system of direct payment for goods and services
The ability to borrow money from someone else with the agreement to pay it back later
A legal document that records a transaction
A type of currency
Who lends credit?
Debtors
Creditors, also known as lenders, persons, businesses, and service providers
Borrowers
Financial advisors
What is a debtor?
A person who lends money to others
A person who saves money in a bank
A person who borrows money from others
A person who invests money in stocks
What must you first do to use credit?
Pay off your current debt
Qualify for credit
Assess your capital
Plan your finances
What could happen if you are spending more than you are making?
You could qualify for more credit
You could bring on a lot of debt
Your capital wealth will increase
You will have to decrease your income
What is capital wealth?
The amount of credit you can take
The money you bring in every month
The form of money or other assets owned by a person after deducting debts
The total amount of your monthly payments
What is one of the advantages of using credit?
It has no fees or finance charges.
It is ideal for purchasing goods and services.
It increases the risk of overspending.
It cannot help in emergencies.
Which of the following is a disadvantage of using credit?
It helps build your credit score.
It is safer to carry around than large sums of cash.
Credit can cause financial issues if used poorly due to overspending.
It helps in emergencies when you may need money that you don't have.
What is Revolving Credit?
A one-time loan that must be repaid over a fixed period
Credit that you can borrow on an ongoing basis with interest rates, a spending limit, and monthly payments
A financial service offered only to businesses for large purchases
A type of savings account with a high interest rate
Which of the following is an example of Open Credit?
Mortgage
Car loan
Cell phone bill
Student loan
What does Installment Credit include in the monthly payments?
Only the principal amount
Principal amount and rewards
Interest and fees
Only fees
What is commonly required as security for a large loan?
A written promise
A credit card
Collateral
A guarantor
Which type of credit is most commonly associated with car loans, student loans, and mortgages?
Revolving Credit
Open Credit
Installment Credit
Deferred Credit
What is a benefit of having a good credit history?
It increases the interest rates on loans.
It decreases your ability to get a loan.
It allows banks to see your ability to pay off debt and how responsible you are for future credit.
It has no impact on your future financial opportunities.
What should you do first when considering getting a credit card or loan?
Apply online or at your bank
Check your credit score
Make a list of what you need the credit card for
Read the fine print
Where can you check your credit score?
At a local bank
On a comparison chart
Online at Experian.com
By speaking with family and friends
Why might you need a cosigner for a loan?
If you are interested in rewards
If you are younger
If you know your interest rates
If you have compared your top choices
What is important to do when shopping around for a credit card or loan?
Apply immediately
Speak only with family and friends about their experiences
Look online, go to a local bank, or speak with family and friends about their experiences
Focus solely on the rewards
What should you do to help narrow down your decision after researching credit card or loan options?
Sign up for the first option you find
Ignore the interest rates
Write the top choices side by side and make a comparison
Only read the promotional material
What is crucial to read before finalizing a credit card or loan?
The promotional offers
The rewards program details
The fine print
The website's homepage
What are the two popular factors in why someone chooses a credit card?
Customer service and fees
Rewards and Interest
Credit limit and balance transfers
Annual percentage rate and cash advances
Why do credit card companies charge interest?
As a penalty for late payments
It's their way of charging you money for borrowing their money
To cover administrative costs
To incentivize early repayment of the balance
What does the term "Principal (P)" refer to in the context of calculating interest rates?
The total amount of interest paid over the life of the loan
The percentage of interest you will pay on the loan
The amount of money borrowed initially
The time the borrower will repay a loan in years
What is the meaning of "Rate (R)" when calculating interest rates?
The time the borrower will repay a loan in years
The amount of money borrowed initially
The total amount of interest paid over the life of the loan
The percentage of interest you will pay on the loan
What does "Time (T)" represent in the context of interest rate calculations?
The percentage of interest you will pay on the loan
The amount of money borrowed initially
The time the borrower will repay a loan in years
The total amount of interest paid over the life of the loan
What does APR stand for in the context of credit cards?
Annual Percentage Rates
Automated Payment Requirement
Adjustable Payment Rates
Annual Payback Ratio
What does APR refer to?
The monthly interest rate on a card
The yearly interest rate on a card
The total amount of credit available on a card
The minimum payment required on a card each month
What is the range of a credit score in the USA?
0-300
300-850
500-1000
100-800
Why does a credit score matter?
It only affects your ability to get a job.
It determines your eligibility for public services.
It can help you apply for loans and affects the credit amount and cost of using credit.
It is only used for educational purposes.
Which of the following is a way to establish a good credit score?
Apply for as many credit cards as possible.
Avoid using a credit card to keep debt low.
Make payments on time and use a credit card often but ensure you can pay the bills.
Close any checking or savings accounts you have.
What is a grace period in the context of credit?
A time period in which payment can be delayed without a penalty.
A premium offered such as a gift, discount, or merchandise in hopes of encouraging a purchase.
A rating assessment based on your creditworthiness to pay back debt.
A summary of your credit card activity, bills, and additional information.
What does incentive buying refer to?
A time period in which payment can be delayed without a penalty.
A premium offered such as a gift, discount, or merchandise in hopes of encouraging a purchase.
A rating assessment based on your creditworthiness to pay back debt.
A summary of your credit card activity, bills, and additional information.
What is a title transfer?
A legal process to change the name on a birth certificate.
A change in ownership over goods or property.
A financial agreement to share the cost of a purchase.
A document that outlines the terms of a rental agreement.
What is co-signing?
Signing a document to confirm receipt of a package.
Agreeing to share the responsibility of a bank account.
A joint signing of a loan or lease with another person to guarantee payment.
Providing a signature for a legal name change.
What is one of the things you should regularly do as part of managing your debt?
Check your credit report.
Close your bank accounts.
Ignore your debts.
Spend more than you earn.
