HDFS #2

What would be the interest cost (simple interest) for a $3,000 loan with a 8% rate for nine months of a year?

180

What should you do when you receive a phone call claiming to be from your bank?

Hang up, call your local bank, ask if there is something wrong with your account(s), and go to the bank the next day to verify your account(s)

Under the Consumer Credit Reporting Reform Act, what would happen if a Credit Bureau verifies inaccurate information?

If the Credit Bureau is wrong about information, the consumer can sue for actual, possibly punitive damages.

If you borrow $200 and it cost you $22 in interest with a service charge of $5, what is the finance charge?

Reason: $22 + $5 = $27

true

The trade-off of using credit is it decreases the availability of money to spend in the future.

Affluent individuals

What demographic originally used credit?

It is not good if you have no money left for emergencies.

Why is it not good to spend your entire monthly income on credit card bills?

A line of ______ is the maximum amount of funds lent to a consumer.

credit

Credit cards are not particularly common among consumers

false

The Fair Credit Billing Act's underlining purpose is:

to protect consumer credit ratings

Banks prefer customers with high credit scores.

true

Which of the following is something that the Equal Credit Opportunity Act is designed to do? Multiple select question.

- Ensure that persons are not discriminated against because of their race, sex, age

What is a credit bureau?

A reporting agency that collects information on how promptly people and businesses pay their bills

Which of the following is not an advantage of using credit?

Misuse of credit can lead to long-term financial problems

What type of applications does the ECOA cover?

The ECOA covers applications for mortgages and home improvement loans.

How does a consumer confirm that they can afford a loan payment?

The consumer's take-home pay covers monthly expenses, loan payment, and other expenses.

One convenient aspect of using credit is that multiple charges can be accumulated and paid in one monthly

bill

Credit

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

to calculate the debt payments to income ratio, total monthly debt payments (excluding home mortgage) is divided by the monthly income of the consumer. This is taken directly from the text

net

The five Cs refer to:

policies that help determine who will receive credit

Family members may only charge interest they would have earned on the money if they had deposited it in a ______ account

savings

A line of credit is a _____term loan that is approved before you actually need the money

short

To calculate the debt payments to income ratio:

total monthly debt payments (excluding home mortgage) are divided by net monthly income

The ECOA covers your mortgage application and bans discrimination based on race, color, age, sex, marital status, national origin, and several other factors.

true

A method to confirm that you can pay for the loan is to confirm if:

you have enough take-home pay to cover monthly expenses, the loan payment, and other expenses.

Long-term financing is more costly than short-term financing because:

you will pay more in interest charges

Positive implications of the use of credit include:

- increased creditworthiness - improved credit score

The _____ handles complaints regarding credit cards online.

CFPB

true

Credit is defined as an arrangement to receive cash, goods, or services now with payment in the future.

Why should you care how to use credit?

If you misuse credit, you will pay for it with future income and it could take many years to pay off the debt.

Why do banks prefer customers with high credit scores?

The customer who has a high score will often pay bills on time.

Irresponsibility can lead to long-term debt and financial difficulty.

What is the problem with being irresponsible with credit?

closed, open

With______ -end credit, you pay back one-time loans in a specified period of time and in payments of equal amounts. With________ -end credit, you pay loans back on a continuous basis and you are billed periodically for partial payments.

A _____ -end loan from the bank for personal purposes, home improvements, or vacation expenses is considered installment cash credit

closed

An example of ______ -end credit is an automobile loan, whereas an example of _______ -end credit would be a credit card

closed, open

With ______ -end credit, you pay back one-time loans in a specified period of time and in payments of equal amounts. With _______ -end credit, you pay loans back on a continuous basis and you are billed periodically for partial payments.

closed, open

With_____ -end credit, you pay back one-time loans in a specified period of time and in payments of equal amounts. With_______ -end credit, you pay loans back on a continuous basis and you are billed periodically for partial payments

closed, open

A loan for a motorcycle is an example of:

closed-end credit

If you ______ a loan and the borrower does not pay the debt, you may have to pay up to the full amount of the debt as well as any late fees

cosign

A reliable way to see if you can afford a loan is to determine what you will give up to make the monthly loan payment.

true

The Fair Debt Collection Practices Act prohibits certain practices by agencies that collect debts for creditors.

true