Personal Finance Exam #2
If you borrow $200 and it cost you $27 in interest with a service charge of $6, what is the finance charge?
$33
The order of items to dispute a billing error:
1. Write a letter of complaint 2. Purchase placed in dispute 3. Receive an acknowledgment from the credit company 4. Purchase removed or credit issued to account
The ideal, not maximum, debt payment-to-income ratio.
15%
What would be the interest cost (simple interest) for a $2,000 loan with a 6% rate for half a year?
2000 x .06 x .5 = $60
The law that protects consumers by setting standards for correcting billing mistakes and allowing customers to avoid paying for defective merchandise is called the ____.
Fair Credit Billing Act
Family loans are simple arrangements and can benefit both parties and no documentation is recommended.
False - family loans can be complicated and steps should be taken to put family loan terms in writing.
Most credit card companies do not charge a fee when a cash advance is made.
False - most do charge a fee for cash advances.
When suing a creditor, you can sue for actual damages and $15,000 in punitive damages.
False - you can only claim $10,000 in punitive damages.
What is the best strategy if you can't make a payment on a debt?
Notify the creditor as soon as possible in an attempt to work out a modified payment plan.
Simple interest is calculated as follows:
Principal x Rate of Interest x Time
How does the Secret Service fight identity theft?
The Secret Service typically focuses on financial fraud cases with large amounts of money involved.
The Act that prohibits creditors from giving inaccurate information or denying consumers the right to cancel credit accounts is:
The Truth in Lending Act
If you purchase a new but defective item that the business will not accept as a return, what does the FCBA require?
The credit card company will allow you to withhold payment on such an item because it is defective.
The opportunity costs and common trade-offs of a housing decision include which of the following?
The loss of home-buying tax advantages and equity growth when you rent an apartment to be close to your work. Cost to commute to work when you live in area that offers less expensive housing. Interest lost on money used for down payment.
A credit bureau is a reporting agency that collects credit and other information about consumers.
True
Credit cards are convenient, but not always better, to use than installment debt because of the latter's application process and procedures; but that ease can lead to overuse.
True
Credit is defined as an arrangement to receive cash, goods, or services now with payment in the future.
True
Loans from finance companies and appliance stores tend to be the highest coast loans.
True
People who have a strong willingness and ability to repay debts generally have the highest credit ratings.
True
The ECOA covers your mortgage application and bans discrimination based on race, color, age, sex, marital status, national origin, and several other factors.
True
The Fair Debt Collection Act prohibits certain practices by agencies that collect debts fir creditors.
True
The Rule of 78s is a mathematical formula to determine how much interest has been paid at any point in a loan.
True
You must qualify to be a member in order to get a loan at a a credit union.
True
You should avoid credit when you don't need the purchase and when you can afford to pay cash to acquire the item.
True
A prearranged amount of money that is accessed with special checks is called:
a bank line of credit a revolving check credit
What is interest?
a periodic charge for the use of credit
Factors that creditor cannot use to deny a person credit:
age marital status color race
If you have funds available on your credit card, you can obtain a cash advance from ____.
an ATM a bank or credit union
Typically, qualified cosigners:
are able to pay loan payments.
When cosigners sign their loans, they:
are saying they are able to pay for the loan if required
The first thing a debtor must do in a Chapter 7 bankruptcy is to draw up a petition listing _____ and liabilities or debts for submissions to the court.
assets
To improve your credit score, it is important to:
avoid applying for new credit cards pay your bills on time understand the computation of outstanding debt
All of the following represent improper use of credit:
bankruptcy default and loss of credit rating
Examples of protecting against fraud are:
be sure your credit card is returned to you after a purchase not giving your card number over the phone unless you have initiated the call
A loan for a motorcycle is an example of ____.
closed-end credit
Renting is a fairly ____ practice in the United States with about 35% of households living in rental units.
common
When selecting an apartment, which of the following aspects of the building's interior should you consider?
condition of elevators exits and security
Economists now recognize ____ ____ as a major force in the U.S. economy.
consumer credit
The three types of credit insurance are:
credit accident and health credit life credit property
The most commonly purchased type of credit insurance is:
credit life insurance
If you cannot make a payment on a debt due, contact the ____ at once to work out a modified payment plan.
creditor
Renting increases mobility by:
decreasing financial investment in a home. decreasing the amount of time one is required to be financially liable for housing. making it easier for people to get up and move.
Examples of open-end credit:
department store credit cards overdraft protection using a bank credit card
Generally considered expensive sources of loans
department stores appliance companies finance companies bank credit cards
The Fair Debt Collection Practices Act ____ to creditors that collect debts themselves.
does not apply
The Truth in Lending law of 1969 requires lenders to state the cost of borrowing as a specific ____ amount so that consumers know exactly what the credit charges are.
dollar
After Chapter 13 bankruptcy, people may find obtaining credit ______.
easier
Renting makes job transfers ______.
easier
Like many financial decisions, when making a housing decision, you should consider what you give up in time, ____, and money as a result of the decision.
effort
Credit cards are not particularly common among consumers.
false
Most credit cards carry a special ____, based on the percentage of the amount borrowed, that is applied when a cash advance is taken out.
fee
What are the advantages of owning a condominium?
fewer maintenance responsibilities when compared to a house tax benefits
The pros and cons of T&E credit cards, such as American Express, include:
full payments due each month annual fees are typically high no finance charge is incurred as full payment of the balance owed is due each month
Which of the following should you consider when determining whether you can afford a loan?
funds remaining for other expenses your monthly expenses your monthly pay
Credit allows you to buy clothes today and pay for them in the ____.
future
Which of the following are signs of possible debt problems?
getting a credit card revoked using up savings borrowing money to pay old debts having little in savings
In what way can credit help consumers live more efficient and productive lives?
getting a loan for a medical emergency
Credit Cards can be a cheaper alternative to an installment loan if the need is short term (less than a month). This is because of the ____ period that is often allowed by credit card companies.
grace
A married couple that doesn't talk about money could be:
having debt problems.
The two main activities of the CCCS are:
helping families with debt problems by helping them manage debts teaching families how to avoid heavy debt burdens in the future
Closed-end credit is paying back a loan:
in a specified period of time and in payments of specified amounts
A loan from the bank for personal use is considered ____ cash credit.
installment
The Rule of 78s favors ____.
lenders
What are the disadvantages of owning a condominium?
less privacy uncertain demand affecting property value monthly fees
Which of the following situations will credit provide an opportunity for a more efficient and productive life?
loan for business operations
Interest rate on cash ____ is often higher than the rate on purchases.
loans
One of the intangible costs of bankruptcy is the difficulty obtaining ____ in the future.
loans
Schools, shopping, and recreation are some of the important ______ aspects of selecting an apartment.
location
The Fair Credit Billing Act provides that you may withhold payment on damaged or defective goods or poor services you have purchased with a credit card as long as you have:
made a sincere attempt to resolve the issue with the merchant.
What is the procedure under consumer credit laws when denial of credit is discriminatory?
make the creditor aware of your understanding of the law sue the creditor file a complaint with the government
Which of the following is NOT true?
most credit card companies do not offer a grace period
A line of credit is a(n) ____ ended type of credit.
open
Family members may only charge interest they would have earned on the money if they had deposited it in a ____ account.
passbook
Which of the following are advantages of borrowing from a credit union?
patient with borrowers personalized service
The new credit CARD Act requires creditors to include a warning on the monthly statement about making only the minimum ____.
payment
In Chapter 7 bankruptcy, a debtor is required to draw up a ______ listing his or her assets and liabilities.
petition
A credit counseling organization usually provides credit management classes and helps you devise a credit management ____.
plan
While most mortgage payments are fixed, ____ can be subject to increases over which the tenant has no control. (Enter only one word per blank.)
rent
Approximately 35 percent of U.S. households live in ______.
rental units
A ____ deposit provides the landlord with funds to cover the cost of any damages done to the rental unit during the lease period.
security
The three types of closed-end credit:
simple lump-sum credit installment cash credit installment sales credit
Closed-end loans are ____ loans repaid within a(n) _____ time frame with equal payments.
specific specific
The major provisions of the Credit Card Accountability, Responsibility, and Disclosure Act of 2009:
state that a teaser rate must be good for at least six months set a consistent due date for each month limits the issuer's ability to increase the interest rate in the first year
Buying decisions make a(n) ____ about your lifestyle.
statement
If you have a complaint about a business while dealing with identity theft issues, you can file a complaint with:
the Federal Trade Commission
When referring to credit, character means:
the borrower's attitude toward credit obligations.
What are the advantages to overspending with credit?
there are no real advantages to overspending on credit
A reason why people tend to choose long-term financing is:
they want smaller monthly payments.
The most important thing you can do to improve your credit score is to pay your bills on ____.
time
A method to confirm that you can pay for the loan is:
to have enough take-home pay to cover monthly expenses, the loan payments, and other expenses.
The Fair Credit Billing Acts underlining purpose is:
to protect consumer credit ratings.
To calculate the debt payments to income ratio:
total monthly debt payments (including home mortgage) are divided by net monthly income.
The costs to Chapter 13 bankruptcy include ______.
trustees' fees and costs attorneys' fees court costs
Security features currently being added to credit cards to deter counterfeiting include:
ultraviolet ink on the company logo a holograph that changes color and image
Just before closing on a house, you often do a ______ before accepting the property.
walk-through
Two situations when you should avoid credit is when you don't ____ or really want the purchase, and when you could pay cash but choose to finance the needed item.
want
Your ____, needs, desires, and attitudes are reflected in your choice of a home.
wants
What is the proper way to correct a billing error?
write a clear letter reporting the error to the credit agency.
Which of the following is part of the billing dispute process?
write a letter to the creditor
What is the main advantage of credit?
you are able to purchase something now, and pay for it later
