WorksheetsCredit Exam Review (Ahrens)
Total questions: 23
Worksheet time: 12mins
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 prepaid debit cards are the same
c)
Debit cards and credit cards are the same
d)
All 3 cards are completely the same
2.
2. 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
3.
3. Which of the following is most likely to represent a SECURED loan? (hint: Collateral)
a)
A student loan
b)
A credit card
c)
A prepaid debit card
d)
An auto loan
4.
4. Which of these statements best explains why it's often a good idea to pay more than the monthly amount due on a 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
5.
5. 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
6.
6. 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
7.
7. 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
8.
8. Benjamin wants to improve his credit score. How is his credit score calculated?
a)
Credit score is calculated based on the number of times Benjamin has applied for a loan.
b)
Credit score is calculated based on the number of credit cards Benjamin has.
c)
Credit score is calculated using various factors such as payment history, credit utilization, length of credit history, types of credit used, and new credit inquiries.
d)
Credit score is calculated based on the amount of money Benjamin earns.
9.
9. 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
10.
10. Lily, Abigail, and Ethan are discussing ways to maintain a good credit score. Which of the following actions can negatively impact their credit scores?
a)
Applying for a mortgage loan
b)
Having a long credit history
c)
Paying off their credit card balance in full every month
d)
Late or missed payments, high credit card balances, applying for too much new credit, and having a short credit history.
11.
11. 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
12.
12. 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
13.
13. Which of the following statements is CORRECT about secured loans? (Hint: Collateral)
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 (get it taken from them)
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
14.
14. 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
15.
15. 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 (loans with SUPER high interest rates)
c)
Become an authorized user on a credit card used by your parent or guardian
d)
Open and use a secured credit card
16.
16. 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)
Amy made a larger down payment, so her monthly payments are also larger
c)
Chuck chose a shorter term for his mortgage, so his monthly payments are also lower
d)
Chuck has a lower credit score, so his interest payments are also lower
17.
17. 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 loan so that the principal of your loan is smaller
b)
A specific type of tax advantaged bank account used for saving money to buy a house
c)
The first year’s worth of property taxes, held in reserve
d)
A prepayment to a real estate agent so that they will start helping you house hunt
18.
18. Dulce has a credit card with a $1000 credit limit. His outstanding balance is currently $800. What is the maximum amount she can now spend on this credit card?
a)
$200
b)
$800
c)
$1000
d)
$1800
19.
19. True or false. Making the minimum payment on a loan increases the amount of interest you pay overall.
a)
True
b)
False
20.
20. 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 off of interest
d)
This helps cardholders develop financial independence
21.
21. What is a potential disadvantage of using a credit card for everyday purchases?
a)
You can track your spending easily
b)
It helps build your credit history
c)
It can lead to overspending and accumulating debt
d)
You can earn rewards points or cash back
22.
22. Which of the following actions can help you avoid paying interest on your credit card?
a)
Making only the minimum payment each month
b)
Applying for multiple credit cards
c)
Using your credit card for cash advances
d)
Paying off the entire balance before the due date
23.
23. What is the primary purpose of a credit score?
a)
To determine your annual income
b)
To calculate your monthly budget
c)
To track your spending habits
d)
To assess your creditworthiness for lenders
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