WorksheetsUnit 4 Test Review
Total questions: 37
Worksheet time: 21mins
What are the three basic components of lines of credit?
Principal, interest rate, and term
Down payment, APR, and lease
Grace period, minimum payment, and collateral
Loan, credit card, and installment payment
What is the main risk associated with payday loans?
They have high annual fees
They can lead to cycles of debt
They require a cosigner
They are only available to authorized users
Which term refers to the cost of borrowing money expressed as a yearly percentage?
Principal
Annual Percentage Rate (APR)
Interest Rate
Minimum Payment
What is the role of an authorized user on a credit card account?
To make payments on behalf of the primary cardholder
To use the credit card without being legally responsible for the debt
To set the interest rate for the account
To negotiate the credit card agreement
The process of paying off a debt in regular installments over a period of time is known as:
Down Payment
Term
Amortization
Variable-Rate Loan
Amanda has taken out a loan which has an interest rate that changes based on the market. This type of loan is called a:
Fixed-Rate Loan
Variable-Rate Loan
Unsecured Debt
Mortgage
A car loan is an example of secured debt because:
It is backed by collateral
It has a fixed interest rate
It is a short-term loan
It does not require monthly payments
When buying a new car, Michael was required to pay 20% of the car’s price upfront as a:
Term
Down Payment
Credit Limit
Unsecured Debt
The maximum amount of money that can be charged to a credit card is known as the:
Term
Credit Limit
Down Payment
Unsecured Debt
Which type of credit is associated with an auto loan?
Installment
Revolving
Fixed
Variable
Which statement describes a prepaid debit card?
May have overdraft fees
Spending limit is how much is preloaded onto the card
Helps build credit score
Charges interest on balances
What determines the spending limit for a debit card?
How much is preloaded onto the card
How much is in your checking account
Your credit score
Your monthly income
Why might someone use a credit card to make a purchase, instead of cash or a debit card?
To earn rewards or cashback on purchases.
To avoid paying interest on purchases.
To ensure they never overspend.
To avoid carrying physical money.
What are some ways people under the age of 21 can start building a credit history and have a credit score?
Open a savings account.
Become an authorized user on a parent’s credit card.
Apply for a high-interest loan.
Use a prepaid debit card.
Sam wants to apply for a credit card. He intends to pay off his balance in full each month, but his finances have been a little tight these past few months. Which of the following is GOOD advice for Sam?
Look for a card with a very high annual fee.
Prioritize getting a credit card with a low APR.
Choose a card with a long grace period.
Apply for multiple credit cards at once.
Why is it important to review a Schumer Box in detail when evaluating a credit card?
It provides information about the card’s rewards program.
It lists the cardholder agreement terms.
It outlines the fees, interest rates, and other costs associated with the card.
It explains how to apply for the card.
Ryan just opened a credit card account and says, “Managing a credit card is so easy! I can buy a ton of stuff, and then just make the minimum monthly payment each month. What a great deal!” What would you say to Ryan to clear up his misconceptions?
Making minimum payments is a good strategy to avoid debt.
Paying only the minimum can lead to high interest charges and long-term debt.
Credit cards are designed to encourage spending without consequences.
Minimum payments reduce your credit score.
What is the difference between a fixed-rate mortgage and an adjustable-rate mortgage?
Fixed-rate mortgages have changing interest rates, while adjustable-rate mortgages have consistent interest rates.
Fixed-rate mortgages have consistent interest rates, while adjustable-rate mortgages have changing interest rates.
Fixed-rate mortgages have lower interest rates, while adjustable-rate mortgages have higher interest rates.
Fixed-rate mortgages are only available for short terms, while adjustable-rate mortgages are available for long terms.
Explain how payday loans can cause a cycle of debt for consumers who use them.
Why are payday loans easier to get than traditional bank loans?
Payday loans require less documentation and credit checks.
Payday loans have lower interest rates than bank loans.
Payday loans are only available to people with high credit scores.
Payday loans require collateral like a car or house.
Which of the following is a benefit of making more than the minimum payment on your credit card each month?
It increases your interest rate.
It helps you pay off your balance faster and reduces interest charges.
It delays your payment due date.
It lowers your credit limit.
What is a key feature of a secured credit card?
It does not report to credit bureaus.
It has no annual fees.
It offers unlimited spending.
It requires a security deposit as collateral.
Which of the following best describes an adjustable-rate loan?
The interest rate remains the same throughout the loan term.
The loan does not require monthly payments.
The interest rate can change based on market conditions.
The loan is paid off in a single lump sum.
Which of the following actions can help improve your credit score?
Paying your credit card balance in full each month
Closing old credit accounts
Making late payments on your credit card
Maxing out your credit limit regularly
What is a consequence of missing multiple credit card payments?
Your credit score may decrease
Your interest rate will be lowered
You will earn more rewards points
Your credit limit will automatically increase
Which type of loan typically requires collateral?
Unsecured personal loan
Secured loan
Credit card cash advance
Payday loan
Which of the following actions could negatively impact your credit score?
Paying bills on time
Maxing out your credit cards
Keeping credit card balances low
Reviewing your credit report regularly
What is one advantage of having a fixed-rate loan compared to a variable-rate loan?
Your monthly payments remain the same throughout the loan term
Your interest rate will decrease automatically
The loan is always interest-free
You can skip payments without penalty
Which statement is true about secured loans?
They cannot be used to purchase vehicles
They are only available for credit cards
They usually have lower interest rates than unsecured loans
They do not require any collateral
Which of the following best describes an unsecured loan?
A loan that requires collateral, such as a car or house
A loan that does not require any collateral
A loan with a fixed interest rate
A loan only available to businesses
What is a common consequence of consistently maxing out your credit cards?
Your minimum payment will be eliminated
Your credit score may decrease
Your interest rate will be reduced
You will receive more credit card offers
Which of the following is a feature of a revolving line of credit?
You borrow a fixed amount and repay in equal installments
You can borrow up to a certain limit, repay, and borrow again
It always has a fixed interest rate
It requires a down payment
Which of the following is NOT a benefit of having a good credit score?
Lower interest rates on loans
Automatic approval for all credit applications
Access to higher credit limits
Better chances of renting an apartment
What does APR stand for when discussing credit cards?
Account Payment Record
Annual Percentage Rate
Automatic Payment Requirement
Authorized Payment Receipt
Which action can help you avoid paying interest on your credit card purchases?
Paying the minimum payment each month
Paying your balance in full before the due date
Using your card only for cash advances
Missing a payment occasionally
Which of the following is most likely to improve your credit score over time?
Paying your bills on time each month
Maxing out your credit cards regularly
Applying for multiple new credit cards at once
Making late payments on your loans
What is the main difference between a debit card and a credit card?
A credit card requires you to have a savings account
A credit card can only be used for online purchases
A debit card uses funds directly from your bank account, while a credit card lets you borrow up to a limit
A debit card allows you to borrow money from the bank
