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A person who has a total of $17,000 in credit card debt decides to use her house as collateral for a bank loan. She then uses her $30,000 home equity loan to pay off the credit card debt. She is now paying back one larger loan at a lower interest rate. What is the danger of using this method to pay back her debt?

If she cannot pay back the equity loan, she is in danger of losing her home.

Which of the following is a true statement about a credit card?

It allows a person to make purchases wherever the card is accepted.

Which of the following is not an advantage of having and using a credit card?

No interest is charged if a minimum payment is made on the account each month.

Which of the following credit card fees is not correctly matched with its description?

Over-the-credit-limit fee: charged if a person spends too much money on all his credit cards together.

If someone uses a ring worth $500 as collateral for a $200 loan, she has most likely obtained a loan from a

Pawnbroker

Why is a payday loan considered to be an unwise way to finance a purchase?

Payday loans carry very high fees equivalent to more than a 100% annual interest rate (APR).

Which of the following is a true statement about credit cards?

Some credit cards encourage people to use their credit by offering them cash back if they buy a certain amount of goods or services.

A person knows that she cannot afford to pay $400 for a coat that she really wants. The financially wise action for her to take is to

buy a less expensive coat that she can pay for immediately.

If a person has mounting credit card debt and cannot pay it down, the first thing she should do is

contact each credit card company with which she has an account and try to negotiate new terms such as a lower interest rate.

Even though a person has overdraft protection on her credit card, she should avoid using this feature because

overdraft fees can be high, although they cannot exceed the amount of the purchase that caused the overdraft.

A person with $5,000 in credit card debt with an 18.5% annual interest rate (APR) receives an end-of-year bonus of $2,000. It is generally considered a financially smart move for this person to

pay off $2,000 of the credit card debt with the bonus so that he pays less in interest.

Which of the following credit card fees is correctly matched with its description?

Annual fee: fee that is charged by the company for the privilege of using the company's card.

A financial tool that provides people with revolving open-end access to funds that they can draw from repeatedly up to some preset limit is known as a

Credit card

How do credit card companies benefit when cardholders pay their bills in full each month and never have to pay interest on balances?

Credit card companies receive 2%-4% of the purchase price of every good or service that is sold to a cardholder.

Which of the following is a true statement?

Creditors require a person to complete a credit application and will conduct a credit check before issuing a credit card.

Why would a credit card company offer a person the opportunity to open a credit card account that will charge 0% interest on purchases or balance transfers for 12 months?

The credit card company expects that the person will continue to make purchases and carry a balance after the introductory period when interest charges go back to normal rates.

What is the advantage to a consumer of having a prepaid cash card?

The person can purchase items up to the limit on the cash card without paying any interest.

The greatest advantage of using a credit card is that it provides

an easy way to establish a personal credit history.