Personal Finance BUS 125 Chapter 6 quiz

Which of the following is true about phishing? A. Getting information from financial institutions under false pretenses B. Rerouting bills to a different address C. Using bills in the trash to obtain others' personal information D. Pretending to be an employee of a financial institution E. Stealing wallets

D. Pretending to be an employee of a financial institution

Credit offered in the form of ______ is most common in department and clothing stores and other high-volume outlets, where customers are likely to make several purchases each month. A. affinity cards B. reward credit cards C. collateralized credit cards D. retail charge cards

D. retail charge cards

Joe and Jane have a tendency to build up large balances on their credit cards. Which of the following features would be least important to them? A. A long grace period B. The method of calculating balances C. High reward points D. Low interest rates on balances E. No annual fee

A. A long grace period

_____ cards offer the cardholder a way to contribute to a worthy cause and are sometimes described as "credit cards with a cause." A. Affinity B. Credit C. Student D. Debit E. Rebate

A. Affinity

Which of the following is the correct expression for calculating the debt safety ratio? A. Total monthly consumer credit payments / Monthly take-home pay B. Gross monthly pay / Total monthly consumer credit payments C. Total monthly consumer credit payments / Gross monthly pay D. Gross monthly pay / Monthly take-home pay E. Monthly take-home pay / Total monthly consumer credit payments

A. Total monthly consumer credit payments / Monthly take-home pay

An improper use of extended credit is buying A. an expensive dinner B. an expensive house C. a piece of land D. an expensive car

A. an expensive dinner

The decision about whether or not to grant you credit will be made by A. individual creditors B. the credit bureau C .the credit card holder D. the Federal Trade Commission

A. individual creditors

When canceling a credit card, you should cut up the card and _____ that you are canceling your account. A. Inform the credit bureau in writing B. Inform the issuer in writing C. Inform the future lender in writing D. Call and inform the issuer E. Call and inform the credit bureau

B. Inform the issuer in writing

Interest will usually begin to accrue immediately when you use a bank credit card to: A. compute finance charges. B. get cash advances. C. meet a financial emergency. D. make purchases. E. send payments.

B. get cash advances.

If your monthly before-tax income is $2,000 and your monthly take-home pay is $1,500, your maximum monthly consumer credit payments should not exceed: A. $600. B. $450. C. $300. D. $400. E. $200.

C. $300

_____ are the credit cards issued in conjunction with a sponsoring group-most commonly some type of charitable, political, or professional organization. A. Reward credit cards B. Collateralized credit cards C. Affinity cards D. Retail charge cards

C. Affinity cards

Which of the following statements is true of retail charge cards? A. Retail charge cards are secured with some form of collateral, such as a bank CD. B. Retail charge cards provide incentives, such as cash, merchandise rebates, airline tickets, or even investments to the users. C. Retail charge cards are issued by retailers that allow customers to charge goods and services up to a pre-established amount. D. Retail charge cards work exactly like debit cards and provide direct access to the checking accounts of consumers. E. Retail charge cards are issued in conjunction with some charitable, political, or other nonprofit organization.

C. Retail charge cards are issued by retailers that allow customers to charge goods and services up to a pre-established amount.

If a borrower has a high credit score, then there is A. a minimal chance of his or her loan getting approved B. a high chance of more collateral requirements for his or her loan C. a high chance of his or her loan getting approved D. no chance of his or her loan getting approved

C. a high chance of his or her loan getting approved

The first step in establishing a credit history is to A. Pay cash for all purchases B. Get a credit card C. Borrow from neighbors D. Open checking and savings accounts

D. Open checking and savings accounts

Using credit is the ideal way to provide for financial emergencies.

False

Credit should not be consistently used for purchasing nondurable goods.

True

Paying a loan ahead of schedule is one way to build a good credit history.

True

The most common method of computing finance charges on a credit card is the average daily balance method including new purchases.

True

An individual can be overusing credit even if he or she can afford to make the minimum monthly payments on time.

True

With a bank credit card, one can often avoid interest charges if: A. the account is a revolving credit account. B. the account balance is below the credit limit. C. at least half the account balance is paid every month. D. the account balance is paid in full every month. E. the minimum payment is made every month.

D. the account balance is paid in full every month.

The finance charges on two credit cards with the same stated annual percentage rate (APR): A. will always be the same. B. will be determined by the types of credit cards used. C. will be decided by credit bureaus. D. will be determined by the methods used to calculate balances. E. will be the same as the interest rate is calculated as defined by federal law.

D. will be determined by the methods used to calculate balances.

Clare's annual gross salary is $36,000, and her after-tax income is $28,800. What is Clare's maximum recommended monthly consumer credit payment? A. $450 B. $200 C. $600 D. $360 E. $480

E. $480

Which of the following is an improper use of credit? A. Purchasing a big-ticket item B. Spreading payments within a budget C. Buying a home D. Meeting a financial emergency E. Buying a short-lived good

E. Buying a short-lived good

James finds it difficult to manage credit but wants the convenience of using a credit card. He wants to get a card that will provide direct access to his checking account. James should get a _____. A. gift card B. student credit card C. retail charge card D. membership card E. debit card

E. Debit card

A straight bankruptcy _____. A. exempts a debtor from all the tax payments and payments for alimony and child-support B. results in the repayment of debt within three to five years C. results in the loss of all the assets of a debtor D. eliminates all the obligations of a debtor E. allows a debtor to retain some other personal assets as per federal regulations

E. allows a debtor to retain some other personal assets as per federal regulations

It is good to use credit for: A. purchasing an expensive perfume. B. buying an expensive dress. C. buying groceries. D. visiting a tourist destination. E. buying a car.

E. buying a car.

An individual's credit bureau file often includes information about his or her political and religious affiliations in addition to his or her financial information.

False

Credit cards with very low minimum payment requirements are in the consumers' best interest.

False