personal finance chapter 7

If you try to charge more than your limit on your credit card, a. the charge can be refused b. the charge may be approved, but you may have to pay an over-the-limit fee c. the charge cannot be refused d. both a and b

both a and b (d)

When interest for a credit card is calculated using the average daily balance method, a. charges in the current billing period are not included b. an adjusted balance is computed for each day of the month c. interest is calculated using the outstanding balance at the end of the previous billing period d. both a and b

both a and b (d)

A penalty for closing your account prior to a stated period

cancellation fee

Which of the following types of credit requires that you pay the balance in full each month? a. installment loan b. credit card c. revolving credit d. charge card

charge card (d)

Property used as security for a loan

collateral

Which of the following types of credit usually has a fixed rate of interest for a set period of time? a. line of credit b. revolving credit c. consumer loan d. store account

consumer loan (c)

When interest for a credit card is calculated based on the amount owed after you have paid your bill each month, the _____ method is used. a. average daily balance b. previous balance c. adjusted balance d. unpaid balance

adjusted balance (c)

On a credit card with a variable rate of interest, a. the credit card company can change the rate without notice b. the interest rates tend to rise fast when interest rates in general are rising c. the interest rates typically go down very slowly d. all of the above

all of the above (d)

When you receive your credit card statement, you should a. compare charges listed with your sales receipts b. verify that payments made are shown on the statement c. verify that credits are shown for returned items d. all of the above

all of the above (d)

Which of the following is a symptom of financial irresponsibility? a. bills are not paid in a timely manner b. one's paycheck does not last the entire month c. there is inadequate food, clothing and shelter to live comfortably d. all of the above

all of the above (d)

The ability to borrow money and pay it back later

credit

Credit for a set amount that is to be paid off in a set period of time is called a. service credit b. installment credit c. revolving credit d. store credit

installment credit (b)

Which of the following is an example of easy access credit? a. low introductory rate b. instant credit offer c. balance transfer offer d. online credit approval

instant credit offer (b)

A preapproved loan amount that a debtor can borrow against, pay back, and borrow again as needed

line of credit

Which of the following online activities should be avoided? a. online pop-up ads offering credit b. online credit card payments and statements c. online credit approval d. online credit purchases

online pop-up ads offering credit (a)

A fee charged for violating a term of the credit agreement

penalty

A refund of part of the purchase price of an item

rebate

An account on which the account holder can charge repeatedly up to a maximum limit

revolving credit

The ability to receive services, such as care by a doctor, and pay for them later is called a. revolving credit b. installment credit c. service credit d. loan credit

service credit (c)

Which of the following is the final step in creating a buying plan? a. define your spending goal b. define the criteria of the item c. set a spending limit d. set a timeline for making a purchase

set a spending limit (c)

The maximum amount you are willing to pay for an item

spending limit

Without credit, many people would have to wait to buy things that could save them time and money.

true

An organized method for making good buying decisions

buying plan

A good buying plan begins with a. evaluating your wants and needs b. setting spending limits c. gathering information d. comparison shopping

evaluating your wants and needs

A fee charged for violating a credit agreement is called a rebate.

false

Easy access credit is usually a good deal for consumers; they should respond promptly to avoid hidden costs.

false

With a line of credit, there is no maximum amount that can be borrowed.

false

Credit used to finance a single high-priced item through a series of equal payments made over a set period of time

installment credit

A lender may require a borrower to provide collateral for a loan.

true

An extended warranty covers repair costs beyond the original warranty period.

true

Buying luxury items while basic needs are not being met is an example of financial irresponsibility.

true

Credit card issuers can lower your credit limit at any time.

true

If you pay the full amount owed on your credit card each month, you can avoid paying interest on an outstanding balance.

true

Low introductory rates on credit cards often last 6 months to a year

true

Many merchants encourage their customers to use store credit accounts.

true

The first step in creating a buying plan is defining your spending goal

true

Using credit provides increased spending power.

true

When you are financially responsible, you are able to meet your own needs by carefully managing your resources.

true

When you report a dispute on your credit card statement, the credit card company must resolve it within a certain time period.

true