Consumer Credit

Experts suggests that you spend no more than ___ percent of your net income on credit purchases.

20

The baby boom generation currently represents about 30 percent of the population but holds nearly ___ percent of the debt outstanding

60

Kathy purchased a $2,000 digital TV from Young's Appliances. She will make 12 equal payments over the next year to pay for it. She is using. A) closed-end credit B) Open-end credit C) Revolving check credit D) a line of credit E) none of the above

A) closed-end credit

The debit card:

A) debits your account at the moment you buy goods or services

If your monthly net (after-tax) income is $1,500, what should be your maximum amount spent on credit payments? A) $200 B) $300 C) $400 D) $500 E) $600

B) $300

Consumer credit A) is a privilege of the affluent. B) dates back to colonial times. C) carries no finance charge. D) is not a major force in our economy. E) use has been declining in recent years.

B) dates back to colonial times.

Installment cash credit is a A) loan that must be repaid in total on a specified day. B) direct loan of money for personal purposes. C) loan that allows the consumer to receive merchandise, such as a refrigerator. D) down payment made on a purchase. E) synonym for a single lump-sum credit.

B) direct loan of money for personal purposes.

"Shopaholics" and young adults are most vulnerable to misusing credit

True

Closed-end in credit is used for a specific purpose and involves a specified amount.

true

Consumer credit dates back to colonial time.

true

Consumer credit is based on trust in people's ability and willingness to pay bills when due.

true

By buying cash for a purchase, you

A) forgo the opportunity to keep the cash in an interest-bearing account

Another name for open-end credit is A) revolving credit. B) a line of credit. C) convenience credit. D) installment credit. E) a single lump-sum credit.

A) revolving credit.

A good example of an open-end credit is A) the use of a bank credit card to make a purchase. B) the mortgage loan from a savings and loan institution. C) automobile loan from a credit union. D) installment loan from a furniture store. E) installment loan for purchasing a major appliance.

A) the use of a bank credit card to make a purchase.

The maximum amount of credit you are allowed by a creditor is called a(n) A) revolving credit. B) line of credit. C) convenience credit. D) installment cash credit. E) single lump-sum credit.

B) line of credit.

Revolving check credit is a A) credit arrangement that has no extra costs. B) prearranged loan for a specified amount that you can use by writing a special check. C) credit arrangement that has no specific repayment plan. D) synonym for installment cash credit. E) synonym for single lump-sum credit.

B) prearranged loan for a specified amount that you can use by writing a special check.

What would be the maximum limit for an individual's debt-to-equity ratio, excluding the home mortgage? A) 0.5 B) 0.33 C) 1.00 D) 2.00 E) none of the above

C) 1.00

Karen is notified by her credit card company that credit limit on her credit card has just been increased to $10,000. This is one example of: A) open-end credit B) close-end credit C) a line of credit D) installment sales credit E) none of the above

C) a line of credit

Installment sales credit is a A) direct loan of money for personal purposes. B) direct loan of money for home improvement. C) loan that allows you to receive merchandise such as a refrigerator or furniture. D) direct loan for vacation purposes. E) synonym for a single lump-sum credit.

C) loan that allows you to receive merchandise such as a refrigerator or furniture.

In determining your credit capacity, you first provide for basic necessities, such as?

C) mortgage or rent

Michael purchases a laptop computer from Best Buy. He will make one big payment without paying any interest as long as he pays it on or before August 15. This is an example of

C) single lump-sum credit

If you cosign a loan

C)you will have to pay up to the full amount of the debt if the borrower does not pay.

Lenders look for the Five C's of credit to determine your creditworthiness. They are Character, Collateral, Condition,_____, and ____.

Capital, and Capacity

Mortgage loans, automobile loans, and installment loans for purchasing furniture or appliances are examples of A) a line of credit. B) a credit card loan. C) open-end credit. D) closed-end credit. E) convenience credit.

D) closed-end credit.

Another name for closed-end credit is A) a line of credit. B) convenience credit. C) revolving credit. D) installment credit. E) bank card credit.

D) installment credit.

Which federal law regulates the use of credit reports, requires the deletion of obsolete information, and gives you access to your file?

D)the Fair Credit Reporting Act of 1971

Although credit permits more immediate satisfaction of needs and desires, it

Does not increase total purchasing power

A good example of a closed-end credit is A) a credit card issued by a department store. B) a credit card issued by VISA or MasterCard. C) using overdraft protection at a bank. D) using a cashier's check to pay for a purchase. E) a mortgage loan.

E) a mortgage loan.

Which of the following agencies can produce for a subscribing creditor, almost instantaneously, a report about your past and present credit activity?

E)Credit Bureau

College Students are not a prime target for credit card issuers

False

When did the installment credit explode on The American scene?

With the advent of the automobile in early 1900s

In a closed-end credit, loans are made on a continuous basis and you make at least partial payment.

false

Most economists do not recognize consumer credit as a major force in the American economy.

false

With an open-end credit, you pay back one-time loans in a specified period of time in equal amounts.

false

Although credit allows more immediate satisfaction of needs and desires, it does not increase total purchasing power.

true

Consumer credit refers to the use of credit for personal needs (except a home mortgage) by individuals.

true

Credit is an arrangement to receive cash, goods, or services now and pay for them in the future.

true

Credit when effectively used, can help you have more and enjoy more.

true

It is safer to use credit, since charge accounts and credit cards let you shop and travel without carrying large amounts of cash.

true

Perhaps the greatest disadvantage of using credit is the temptation to overspend.

true