Chapter 7

If you are a person who always pays off the total outstanding balance on your credit card each month, which of the following aspects of the credit card agreement will you be least interested in? (Assume there is a 21-day grace period.)

APR

The total cost of credit on a yearly basis stated as a percentage rate is its

APR

Which of the following credit contract clauses requires that all remaining payments on an installment debt be paid on demand of the creditor after a specific number of payments are unpaid?

Acceleration

Raynelle, an active environmentalist, has a MasterCard with the Sierra Club logo on it. What type of card is this?

Affinity card

Jason took his friend Jennifer out for her 21st birthday. He paid for the dinner with his Visa card and purchased a dozen red roses using his American Express green card. John will have to pay his ____ bill upon receiving the statement, but he will have the option of paying his ____ bill over several months.

American Express; Visa

Which type of credit card allows the holder to make purchases almost anywhere?

Bank credit card accounts

Which type of credit card is issued through commercial banks and other financial institutions?

Bank credit card accounts

Miako has just applied for a credit card that offers a 1.9 percent interest rate for 12 months. At the end of 12 months, the interest rate will be "prime plus 9 percent." Which of the following characteristics does this card have?

Both variable interest rates and teaser rates

Credit interest rates that go up and down according to interest rates in the economy as a whole are referred to as

variable rates.

Under the Fair Credit Billing Act, you must make billing error complaints ____ to protect your legal rights.

within 60 days after the first bill containing the error was mailed to you

Most credit cards have a grace period only if

you paid the balance in full the previous month.

Which type of credit card is issued through retail sellers and businesses?

Retail credit cards

Which of the following should not be done when you find an error on your credit card statement?

Send all original documentation to the credit card issuer.

Which of the following is not an example of an open-end credit account?

Single-payment loans

Hillary borrowed $2,000 from her credit union to purchase a new computer. This is an example of All of these. a cash loan. a sales credit. a purchase loan.

a cash loan

If you purchase an item using a credit card and later take it back for a refund you will receive

a credit receipt and the amount will be charged back to the merchant by your card issuer.

If you are likely to pay your balance in full each and every month, select a credit card with

a grace period and no annual fee.

You might find yourself obligated to pay an entire debt in full if you miss several payments because of the ____ clause found in most installment loan contracts.

acceleration

Cash advance checks can be used for which of the following purposes? Make a purchase or pay a bill All of these. Cashed to obtain liquid funds Pay the balance of another credit card

all

Credit card costs can include transaction fees. interest. annual fees. all

all

If no payment is received by the due date on a credit account, the cardholder may be declared in default. a credit bureau may be notified of slow payment. the company may begin collection efforts. all of these

all

If no payment is received by the due date on a credit account, a credit bureau may be notified of slow payment. the cardholder may be declared in default. the company may begin collection efforts. all

all

Revenues for depository institutions that issue bank credit cards are generated from annual membership fees. fees paid by participating merchants. finance charges. All of these.

all

A cash advance can be obtained by using

bank credit card accounts.

The time period between billing dates on your credit cards is the

billing cycle

Banks that issue credit cards typically impose penalty APRs on certain borrowers to raise the APR for the entire debt repayment when

both a payment is more than 60 days late and a payment by check is returned for insufficient funds on accounts at that bank.

Noninstallment credit includes

both single-payment loans and open-end credit.

Installment purchase agreements are also called

collateral installment loans or chattel mortgage loans.

A line of credit is structured much like a

credit card account.

The contract supporting a credit card account is called a(n)

credit card agreement.

Which of the following pieces of information does not have to be disclosed in credit card ads and applications?

credit limit

The declining-balance method is widely used to calculate interest on installment loans made by

credit unions.

Interest assessed during each payment period (usually each month) based on the current outstanding balance of the installment loan is referred to as which method of calculating interest?

declining balance

A borrower who has failed to make a payment of principal or interest when due or meet any other requirement of a credit agreement is said to be in

default

The borrower will not receive the full amount of a loan when the ____ method is used to calculate interest.

discount

Letters from a creditor demanding immediate payment for a past due account are referred to as

dunning letters.

A secured loan requires

either collateral or a cosigner.

If finance charges are not assessed on new credit card transactions during the period between the posting date and the due date, this period is called the ____ period.

grace

The legal right to seize and dispose of property to obtain payment of an unpaid claim is called a(n)

lien

With a(n) ____, a customer asks to have a purchase put on his or her account for repayment at a later date without using a credit card.

retail charge account

Credit cards issued by local and national merchants and other major non-bank companies are examples of

retail credit accounts.

Which of the following is an example of an unsecured debt?

signature loan

An installment purchase agreement provides a measure of protection for

the borrower

Which of the following terms is not necessarily associated with a secured loan?

the rule of 78s

Failure to pay the balance in full in a given month on a credit card with a grace period means that you

must pay interest on all new borrowings with the card since the last billing statement.

Single-payment, open-end, and service credit are lumped together under the category of

noninstallment credit.

A line of credit acts very much like

open-end/revolving credit.

When the declining-balance method is used to calculate interest on an installment loan, the periodic interest rate is applied to the

outstanding balance each period.

The rule of 78s is a commonly used method of calculating the

prepayment penalty.

The outstanding balance owed on a debt is the

principal.

The contract supporting an installment loan is called a(n)

promissory note.