WorksheetsTypes of Credit Unit Test (Sem. 1) 24 25
Total questions: 23
Worksheet time: 12mins
Name
Class
Date
1.
Last Name:
4 lines
2.
Class Period:
4 lines
3.
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 prepaid debit cards are the same
c)
Debit cards and credit cards are the same
d)
All 3 cards are completely the same
4.
2. The average APR for a payday loan is closest to …
a)
4%
b)
14%
c)
40%
d)
400%
5.
3. Which of the following statements comparing credit and debit cards is TRUE?
a)
Far more businesses accept credit cards than debit cards
b)
Credit cards pull money directly from your bank account, while debit cards get their money from Visa or Mastercard
c)
Credit card companies provide you with a monthly statement, while debit cards do not
d)
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
6.
4. Which of the following is most likely to represent a fixed rate, secured debt?
a)
A student loan
b)
A credit card
c)
A prepaid debit card
d)
An auto loan
7.
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)
Every time you pay extra, the lender will reduce the interest rate they're charging by a small amount
b)
The extra payment will be applied to the principal amount you owe, which will pay down your debt more quickly
c)
The extra payment will be applied to the interest you owe, which will reduce the overall cost of your loan
d)
Amortized loans typically have much higher interest rates than credit cards, so they're the best place to put your extra cash
8.
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
c)
Continue making all payments and call your lenders and see if you can negotiate lower monthly payments, lower interest rates, or longer terms
d)
Explore whether a free or non-profit credit counseling service could help
9.
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, Increases, Increases
b)
Constant, Decreases, Increases
c)
Variable, Decreases, Increases
d)
Variable, Decreases, Decreases
10.
9. Which of these credit payback strategies would lead to the HIGHEST overall cost?
a)
Paying off your credit card bill in full every month
b)
Paying 20% of your credit card balance every month on time
c)
Making the minimum payment (3% of your credit card balance) every month on time
d)
Making the minimum payment (3% of your credit card balance) every month with an occasional late payment
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 $2500 for your down payment, and choose a loan with a short term length
c)
Put in $3500 for your down payment, and choose a loan with a long term length
d)
Put in $5000 for your down payment, and choose a loan with a long term length
12.
13. What is an advantage of using a credit card?
a)
It will not affect your credit score or credit history
b)
Since it is tied directly to your checking account, it prevents you from spending money you do not have
c)
If you need to carry a balance, the interest rates are generally quite low (less than 5%)
d)
You can make an emergency purchase that you otherwise don’t have the money to pay for right now
13.
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)
If you make the minimum payment on your card within the 25 day period, the credit card company will not charge you interest
b)
If you pay your previous balance in full after the due date, the credit card company will not charge you interest
c)
25 days is an exceptionally long period without paying a credit card bill
d)
The 25 days after the end of the billing cycle is referred to as the grace period
14.
15. A loan with a shorter term length will have __________ monthly payments, and you will pay __________ in total interest.
a)
higher, less
b)
higher, more
c)
lower, less
d)
lower, more
15.
16. Select the statement below that accurately describes a characteristic of a credit card.
a)
You owe the same payment every month
b)
You must have money deposited into a checking account to use the credit card for purchases
c)
Making full payments on-time every month is the only way to avoid interest charges
d)
They do not charge interest
16.
17. Which of the following statements is CORRECT about secured loans?
a)
They are a good choice to use for student loans
b)
If the borrower does not make payments, the lender can repossess the item
c)
In the event of default, the borrower loses nothing except for the down payment
d)
They usually have higher interest rates as compared with unsecured loans
17.
18. An excellent credit score will help with which aspect of car financing?
a)
Bargaining for a great sales price
b)
Receiving a large down payment
c)
Qualifying for a low interest rate
d)
Having a wide selection of term lengths
18.
19. As a young adult, all of the following are good strategies for building credit, EXCEPT:
a)
Open a credit card, with your parent or guardian as a cosigner
b)
Take out a payday loan
c)
Become an authorized user on a credit card used by your parent or guardian
d)
Open and use a secured credit card
19.
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 are just another word for direct deposit, and almost all employers offer their employees direct deposit instead of a paper paycheck
c)
Payday loans require proof of employment or other regular income but not a credit check
d)
Payday loans are typically for such small dollar amounts that no one cares if you repay them or not
20.
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)
$800
c)
$1000
d)
$1800
21.
24. Which of the following statements is true about this Schumer Box?
a)
Depending on your creditworthiness, the APR for a borrower will always either be 8.99%, 10.99% or 12.99%
b)
There is an introductory APR that is valid only for 1 year, but then the permanent APR is lower than that at 8.99%.
c)
You will never be charged an APR higher than 14.99%
d)
A 28.99% APR may be applied to your account for late payment
22.
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 is required by federal law for tax purposes
b)
This allows the card holder to pay their bill quickly and close the card when they’re ready
c)
This enables the credit card company to make more money
d)
This helps cardholders develop financial independence
23.
These are other things that you should review for the Types of Credit Unit Test (The answer to this is TRUE): Reasons to establish credit; Things that impact ability to pay back debt; Terms (Installment Loans, Fixed Rates, Secured Debt; Annual Fees, APR)
a)
True
b)
False
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