Skill Quest Chapter 6

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A(n) _____ is an agency that provides credit information about individual borrowers to lenders. a. ​credit bureau b. ​credit scoring house c. ​insurance company d. ​consumer bureau e. ​bank

a

For a person who uses his or her credit card very frequently, which calculation method would produce more interest income? a. ​Two-cycle average daily balance including new purchases b. ​Annual percentage rate method including new purchases c. ​Double declining average daily balance excluding new purchases d. ​Average daily balance including new purchases e. ​Effective daily balance excluding new purchases

d

Interest will usually begin to accrue immediately when you use a bank credit card to: a. ​get cash advances. b. ​send payments. c. ​meet a financial emergency. d. ​make purchases. e. ​compute finance charges.

a

Personal insolvency can be legally satisfied by: a. ​Chapter 13 bankruptcy b. ​not taking any credit in the future. c. ​relinquishing all credit cards. d. ​Chapter 4 bankruptcy. e. ​canceling loans availed so far.

a

What does a lender look at before granting credit? a. ​Age of the borrower b. ​Religious affiliations of the borrower c. ​Political interests of the borrower d. ​Friend circle of the borrower e. ​Lifestyle of the borrower

a

With a bank credit card, one can often avoid interest charges if: a. ​the account balance is paid in full every month. b. ​at least half the account balance is paid every month. c. ​the account is a revolving credit account. d. ​the minimum payment is made every month. e. ​the account balance is below the credit limit.

a

Anna uses her credit card regularly, but she pays off the total balance monthly. Anna should look for a credit account with: a. ​no rebate programs. b. ​no annual fees. c. ​no grace period. d. ​low interest rates. e. ​no reward points.

b

Any credit card purchase will effectively be an interest-free loan if you: a. pay the minimum payment.​ b. ​pay the entire balance on or before the due date. c. ​receive a cash advance. d. ​pay the previous balance by the due date. e. ​pay for the purchase within six months.

b

As a percent of take-home pay, monthly consumer credit payments should not exceed _____. a. ​25% b. ​20% c. ​10% d. ​15% e. ​5%

b

Chapter 7 bankruptcy will: a. ​sell only the home of the borrower. b. ​eliminate most of the financial obligations of the borrower. c. ​require the debtor to pay back the debt in the future. d. ​result in the loss of all of one's assets. e. ​restore all the losses incurred by the borrower.

b

Joe and Jane have a tendency to build up large balances on their credit cards. Which of the following would be least important to them? a. ​High reward points b. ​Long grace period c. ​Low interest rates on balances d. ​Method of calculating balances e. ​No annual fee

b

Retail charge cards are advantageous to merchants because: a. ​they help the merchants get loans. b. ​they help build consumer loyalty. c. ​they help the merchants file for bankruptcy. d. ​they help the merchants in saving taxes. e. ​they help the merchants in giving loans to their suppliers

b

When comparing credit cards, a person who pays his total outstanding balance off monthly would want a card with: a. ​a low required minimum payment percentage. b. ​no annual fee c. ​a high interest rate. d. ​no grace period. e. ​high over-the-limit fees.

b

Which of the following is true about phishing? a. ​Stealing wallets b. ​Pretending to be an employee of a financial institution c. ​Using false pretense to get information from financial institutions d. ​Using bills in the trash to obtain personal information e. ​Rerouting bills to a different address

b

William uses his bank credit card frequently; however, he always pays off the total balance on the card each month. What should William look for in a credit card given the way he uses one? a. ​Low annual fee and short grace period b. ​No annual fee and long grace period c. ​Low annual fee and low interest rate d. ​No annual fee and short grace period e. ​High annual fee and low interest rate

b

​Which of the following is true about credit scoring systems? a. ​Credit unions calculate and sell credit scores to lenders. b. ​Scoring systems are based on statistical studies. c. ​Lower scores are better than higher scores. d. ​Stronger the personal traits of a person, lower will be his credit score. e. ​Females receive higher scores than males.

b

A payment made by _____ is equivalent to paying by cash a. ​a reward card b. ​a retail credit card c. ​a debit card d. ​an affinity card e. ​a student credit card

c

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. ​$360 b. ​$200 c. ​$480 d. ​$600 e. ​$450

c

To establish creditworthiness and to have a good credit score, one should probably first: a. ​use credit extensively. b. ​pay cash for all purchases. c. ​open savings and checking accounts. d. ​arrange for a large loan from close relatives. e. ​arrange for a small loan.

c

When canceling a credit card, you should cut up the card and _____ that you are canceling your account a. ​call the credit bureau and tell them b. ​inform the credit bureau in writing c. ​inform the issuer in writing d. ​call the issuer and tell them e. ​inform the future lender in writing

c

Which of the following information can be excluded from a monthly credit card statement? a. ​Annual percentage rate b. ​Payment due date c. ​Type of goods purchased d. ​Finance charge, if any. e. ​Size of the payment

c

Which of the following will lead to poor credit rating? a. ​Opening checking and savings accounts b. ​Making payments ahead of scheduled time c. ​Applying for a long-term loan and occasionally being late with a payment d. ​Discussing with the lender if you foresee difficulty in making a payment e. ​Opening and using a charge account

c

cards offer the cardholder a way to contribute to a worthy cause and are sometimes described as "credit cards with a cause." a. ​Rebate b. ​Credit c. ​Affinity d. ​Debit e. ​Student

c

​Which of the following modes of identity theft involves thieves obtaining your personal information from financial institutions and other sources under false pretenses? a. ​Dumpster diving b. ​Phishing c. ​Pretexting d. ​Old-fashioned stealing e. ​Skimming

c

Mike has a MasterCard with an annual fee of $25, an 18% interest, and a $1,000 credit limit. He always pays the total outstanding balance monthly. His most recent monthly statement lists last month's payment, new charges this month totaling $1,500, and a $30 fee. The fee is most likely the result of: a. ​his annual fee. b. ​transaction fees on purchases. c. ​a late payment. d. ​an over-the-limit fee. e. ​interest charges.

d

Which of the following cards provide direct access to your checking account? a. ​Reward cards b. ​Affinity cards c. ​Retail charge cards d. ​Bank debit cards e. ​Student credit cards

d

Which of the following credit problems is a consequence of a wallet full of credit cards? a. ​Safety from identity theft b. ​Easy loan approval c. ​Safety from bankruptcy d. ​FICO score reduced e. ​Wise spending of credit

d

Which of the following is an improper use of credit? a. ​Buying a home b. ​Spreading payments within a budget c. ​Meeting a financial emergency d. ​Buying a short-lived service e. ​Purchasing a big-ticket item

d

​Russ and Lois have a home valued at $96,000 with an outstanding mortgage of $60,000. If their lender is willing to provide a home equity loan of up to 75% of the market value of the home, how much could they borrow using a home equity loan? a. ​$28,000 b. ​$27,000 c. ​$36,000 d. ​$12,000 e. ​$0

d

Ann Marie accumulated a large balance on her credit card while in college. She is trying to get it paid off as quickly as possible and wants to roll the balance onto a new credit card. She now uses a credit card only for emergencies. What should Ann Marie look for in a credit card given the large balance and the way she plans to use the card? a. ​Average daily balance method excluding purchases b. ​Long grace period c. ​Low annual fee d. ​Two-cycle average daily balance method e. ​Low annual percentage rate

e

Finance charges on two credit cards with the same stated annual percentage rate (APR): a. ​will be determined by the type of credit card used. b. ​will always be the same. c. ​will be the same as the rate calculated in the federal law. d. ​will be decided by the credit bureau. e. ​will be determined by the method used to calculate balances.

e

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. ​$400. b. ​$200. c. ​$600. d. ​$450. e. ​$300.

e

Which of the following cards is issued as a form of credit by department stores and oil companies? a. ​Debit card b. ​Credit card c. ​Student credit card d. ​Gift card e. ​Retail charge card

e

Which of the following information can be excluded from a monthly credit card statement? a. ​Size of the payment b. ​Payment due date c. ​Annual percentage rate d. ​Finance charge, if any. e. ​Type of goods purchased

e

is a benefit of using credit cards. a. ​Being able to buy inexpensive goods while spreading the payments over time b. ​Providing payments for living beyond one's means c. ​Making impulse purchases d. ​Being able to meet everyday living expenses e. ​Being able to meet a financial emergency

e

​Which of the following information is redundant when the lender when analyzes the creditworthiness of a borrower? a. ​Housing b. ​Personal/family matters c. ​Employment d. ​Income e. ​Lifestyle

e


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