PF 5- Debt and Stewardship, Credit Cards, Creditworthy, & Credit Problems- 11/16/17(Thur.)- Q1: Credit
Q 1- Q 5: In the following credit card statement, what is the balance?
- $10 - $130.23 - 5-13-2010 - $202.23 answer: - $202.23
PF 5- Sec. 2: What is the minimum amount due on the following credit card statement?
- $10 - $202.23 - $1,797.77 - $15 answer: - $10
PF 5- Sec. 2: Mario has a remaining balance of $1,300 on his credit card. His credit card has an APR of 20 percent. How much will he pay in interest in one month?
- $20.00 - $260 - $21.67 - $16.00 answer: -$21.67 $1,300x0.20= $260
Q 1- Q 6: Manuel has a remaining balance of $563 on his credit card. His credit card company has an APR of 15 percent. How much will Manuel pay in interest for one month?
- $7.04 - $84.50 - $15 - $1.25 answer: - $7.04 $563x0.15=$84.50
Q 1- Q 16: Nicholas makes $2,000 per month. He spends $300 on credit card payments and $350 on an auto loan. What is his debt-to-income ratio?
- 17.5 percent - 22 percent - 2.7 percent - 32.5 percent answer: - 32.5 percent
Q 1- Q 10: What is the most important factor to consider when selecting a credit card if you pay the balance every month on time?
- APR - annual fee - late fee - over-the-limit fee answer: - annual fee
PF 5- Sec. 1: Which of the following is not a Biblical principal as far as debt is concerned?
- Debt should be avoided whenever possible. - Only accumulate long-term debt. - Avoid making promises to pay without a sure way to pay. - The borrower has an absolute commitment to repay. answer: - Only accumulate long-term debt. Avoid long-term debt
PF 5- Sec. 4: Jillian has a low credit score, and she will not be able to pay the minimum balance on her credit card bill next month. What should Jillian do?
- Pay her credit card balance by taking a cash advance from another credit card. - Find credit counseling services. - Run a credit report. - Apply for a subprime loan. answer: - Find credit counseling services.
PF 5- Sec. 4: Choose all that apply. Select all of the strategies for avoiding credit problems.
- Set goals. - Use the debt-to-income ratio to determine if you are ready for a big purchase. - Run a credit report annually. - Create a budget and stick to it. - Get rid of unnecessary expenses. - Pay bills on time. answer: - Set goals. - Use the debt-to-income ratio to determine if you are ready for a big purchase. - Run a credit report annually. - Create a budget and stick to it. - Get rid of unnecessary expenses. - Pay bills on time.
PF 5- Sec. 2: If an individual pays the minimum payment each month, she will quickly pay off her credit card.
- True - False answer: - False
PF 5- Sec. 4: Garnishment is when finance charges are added to your credit card account when the bill is unpaid.
- True - False answer: - False
Q 1- Q 2: A grace period is a length of time before the credit card company starts charging late fees.
- True - False answer: - False
PF 5- Sec. 1: Credit is the agreement to repay a lender for buying something.
- True - False answer: - True
PF 5- Sec. 3: FICO is a credit score.
- True - False answer: - True
Q 1- Q 1: Garnishment is what happens when a lender obtains money from an individual's employer to pay an unpaid debt.
- True - False answer: - True
PF 5- Sec. 3: Collin has a credit card bill of $3,000. He makes only the minimum payment and is always close to the limit on his credit card. Is Collin using credit responsibly?
- Yes - No answer: - No
PF 5- Sec. 1: Karina had an emergency fund saved. However, when she had to stay in the hospital, the bills added up to about $1,000 more than she had saved. She decided to use her credit card to pay for the remaining hospital bills. Was Karina using credit responsibly and being a good steward?
- Yes - No answer: - Yes
PF 5- Sec. 2: What is the most important factor to consider if an individual expects to carry a balance on his credit card from time to time?
- annual fee - APR - late fee - over-the-limit fee answer: - APR
Q 1- Q 13: Choose all that apply. Select all the possible consequences of excessive debt.
- bankruptcy - low credit score - subprime loans - foreclosure - repossession answer: - bankruptcy - low credit score - subprime loans - foreclosure - repossession
PF 5- Sec. 3: Choose all that apply. Select each type of credit.
- credit card - installment account - loan - automatic credit - service credit answer: - credit cards - service credit - loan - installment account
Q 1- Q 12: A report prepared by a credit bureau which shows details of an individual's credit history is called a _____.
- credit report - credit score - spending report - credit history answer: - credit report
Q 1- Q 8: Good stewards avoid debt because _____.
- debt does not cost any money - debt can negatively affect contributing to God's work and giving generously in the future - God prefers us to live meagerly - it can be a distraction from prayer answer: - debt can negatively affect contributing to God's work and giving generously in the future
PF 5- Sec. 4: If a lender is not paid and they take the collateral that secured the loan, this is called _____.
- garnishment - bankruptcy - foreclosure - repossession answer: - repossession
Q 1- Q 9: Anthony received his first credit card bill. Since he wants to be a good steward and use credit responsibly, he should ____.
- make the minimum payment - make the minimum payment plus $30, though he could pay more - pay the entire balance - make the payment using another credit card answer: - pay the entire balance
PF 5- Sec. 2: If an individual has a balance on her credit card, but would like to pay less money in the long run, she should _____.
- make the minimum payment every month - talk with her credit card company about removing her annual fee - pay as much as possible each month - close her account and transfer her balance to a different credit card answer: - pay as much as possible each month
PF 5- Sec. 2: The grace period is the _____.
- maximum amount of money you can charge on the credit card - time before the credit card company starts charging late fees - least amount of money that must be paid at the end of a month - period of time before the credit card company starts charging interest answer: - period of time before the credit card company starts charging interest
Q 1- Q 15: Cole has a credit card bill of $3,100. His credit limit is $3,000. Is Cole using credit responsibly or irresponsibly?
- responsibly - irresponsibly answer: - irresponsibly
Q 1- Q 11: When an individual makes minimum payments on a credit card instead of paying as much as possible, _____.
- the time it takes to pay off the credit card decreases and the total cost increases - the time it takes to pay off the credit card increases and the total cost increases - the time it takes to pay off the credit card decreases and the total cost decreases - the time it takes to pay off the credit card increases and the total cost decreases answer: - the time it takes to pay off the credit card increases and the total cost increases
PF 5- Sec. 3: To obtain your credit report, you should _____.
- visit the official web site and complete the necessary steps - write to the credit bureau asking for a report - complete a lengthy form at the bank and give it to a customer service representative - call a credit card company for a copy answer: - visit the official web site and complete the necessary steps
PF 5- Sec. 3: A credit report is a _____.
- written paper from past creditors recommending an individual for more credit - computer-generated number that tells if a person is creditworthy - a report prepared by a credit bureau that shows details of an individual's credit history - statement that lists how much you owe on your credit accounts answer: - a report prepared by a credit bureau that shows details of an individual's credit history
PF 5- Sec. 4: Grace makes $2,200 per month. She spends $300 on credit card payments, $120 per month for a furniture purchase, and $450 on an auto loan. Does she have excessive debt?
- yes - no answer: - yes $300+$120+$450=$870 $870/$2,200=0.39545454545 0.395x100=39.5 Debt-to-income ratio=debt/income x 100 keep ratio under 30%
APR
Annual Percentage Rate; the yearly interest rate a credit card company charges to borrow money
Q 1- Q 18: Name at least three strategies for avoiding credit problems.
Writer: - Set goals. - Use the debt-to-income ratio to determine if you are ready for a big purchase. - Create a budget and stick to it.
PF 5- Sec. 3: Name at least four factors that a lender investigates when considering whether you are creditworthy.
Writer: 1. First, an applicant applies for credit with a lender, like a company or a bank, for a loan or credit card. 2. Next, the lender requests a credit report with a credit bureau. 3. Lenders also look at living expenses, money owed, and current income to figure out how much a person can afford to borrow. 4. After they analyze the report, they decide whether they'll provide credit to the applicant.
PF 5- Sec. 1: List at least two reasons why a good steward should avoid debt.
Writer: 1. Maintain a budget. 2. Save.
PF 5- Sec. 4: Name at least three consequences of excessive debt.
Writer: 1. low credit score 2. subprime lending 3. foreclosure
PF 5- Sec. 3: In a few sentences, explain how a credit score affects creditworthiness and the cost of credit.
Writer: Credit score can affect how much interest you pay for a home loan. People with scores above 620 have a good chance of obtaining credit at a good rate; however, a score below 620 may prevent a borrower from getting the best interest rates, as they may be considered a greater credit risk.
PF 5- Sec. 2: In two to three sentences, describe how making minimum payments on credit card balances increases the total cost and is not in accordance with being a good steward.
Writer: If you don't pay the entire balance, you are charged interest, and good stewards avoid paying interest. If you want to pay less money for the same purchases in the long run, you should pay the entire balance right away, or as much extra as you can.
Q 1- Q 19: How does a lender use a credit report?
Writer: a report prepared by a credit bureau that shows details of an individual's credit history; used by a lender to determine whether an individual is creditworthy
lien
a claim to take and hold property until a debt is paid
bankruptcy
a legal statement that an individual is unable to pay lenders, involving a court process that protects people while they repay debts or the court removes the debts
credit score
a number that lenders look at to see if an individual is creditworthy; also called a FICO score
grace period
a period of time before the credit card company starts charging interest
foreclosure
a process in which a lender tries to regain property because the borrower has not made payments
garnishment
a process when a lender tries to obtain money from an individual's employer to pay an unpaid debt
credit report
a report prepared by a credit bureau that shows details of an individual's credit history; used by a lender to determine whether an individual is creditworthy
inquiry
a request for a person's credit report
service credit
a type of credit or promise to pay for services, such as phone, electricity, and water
credit
an agreement in which the borrower buys something of value and agrees to repay the lender
debt
an amount of money that is owed to a bank, a credit card company, a store, or another individual
Q 1- Q 7: Select all that apply. Select each of the Biblical principals regarding debt. - Debt should be avoided whenever possible. - Avoid long-term debt. - Avoid credit cards. - Don't promise to pay without having a sure way to do so. - Avoid paying taxes. - The borrower has an absolute commitment to repay.
answer: - Debt should be avoided whenever possible. - Avoid long-term debt. - Don't promise to pay without having a sure way to do so. - The borrower has an absolute commitment to repay.
PF 5- Sec. 1: Choose all that apply. Identify the strategies you can use to avoid debt. - Earn extra income to pay for special purchases. - Save. - Research the best prices. - Maintain a budget. - Be disciplined and only buy what you can afford. - Pay with credit cards, instead of cash. - Plan how you will spend your money.
answer: - Maintain a budget. - Save. - Be disciplined and only buy what you can afford. - Research the best prices. - Plan how you will spend your money. - Earn extra income to pay for special purchases.
Q 1- Q 17: Choose all that apply. Select all the fees a credit card may have. - annual fee - APR - balance transfer fee - cash advance fee - late fee - overdraft fee - over-the-limit fee
answer: - annual fee - balance transfer fee - cash advance fee - late fee - over-the-limit fee
Q 1- Q 3: A cash advance is _____. - cash borrowed from a credit card account - a bonus from the credit card company for being a good customer - a loan obtained for spending money - using a bonus from work to pay off credit debt
answer: - cash borrowed from a credit card account
Q 1- Q 4: An installment loan _____. - is a loan with changing interest rates - has equal payments each month - can be used like a check - is used to pay for telephone or electricity
answer: - has equal payments each month
Q 1- Q 14: How often should you get a credit report? - once per year - once per month - every other year - just before you apply for credit
answer: - once per year
cash advance
cash borrowed from a credit card account, for which cash advance the credit card company charges fees and higher interest rates
installments
equal payments usually made over several years
creditworthy
having an acceptable credit rating; considered responsible to borrow money
finance charges
interest and fees charged for making purchases using a credit card
subprime lending
loans with very high interest rates
credit limit
maximum amount of money that an individual is authorized to use
debt-to-income ratio
the amount of debt compared to income; a ratio used to determine if an individual has excessive debt
previous balance
the amount owed at the end of the previous billing period
lender
the bank or company that lends money on the condition that it will be paid back
periodic rate
the interest rate one is charged for one payment period, a rate that is usually the APR divided by twelve
minimum payment
the least amount of money that must be paid at the end of a month
repossession
the seizing of the collateral or item that secured the loan when the debt has not been paid
Truth in Lending Disclosure
the statement that federal law requires a credit card company to provide in order to explain their terms
