Personal Finance Ch. 7 & 8
You should be very selective in shredding documents and when in doubt, do not shred them
FALSE
An advantage to credit is it eliminates the need for writing checks
TRUE
Credit cards are an example of revolving open-end credit
TRUE
You can begin to build a credit history by having telephone service
TRUE
Your credit report can be requested on love and should be checked periodically for errors
TRUE
Discuss the reasons why someone would wish to steal your identity
To obtain money, goods, and services and also to create a new identity unknown to authorities to facilitate criminal activities
The proper use and control of credit is the best way to build a good credit history
True
Identity thieves that obtain your information from the magnetic strip on your credit card are using technique known as a. shoulder surfing b. dumpster diving c. pretexting d. skimming
d.. skimming
Credit arrangement where the balance may be paid off monthly and interest is only charged on the remaining unpaid amount
revolving open-end credit
Extends credit by providing a service and billing for the service at the end of the time period
telephone company
You should review your credit report at least _____
twice a year
Transunion is not one of the three primary credit bureaus
FALSE
Obtaining money, goods, and services are the only reasons for identify theft.
False
Revolving open-end credit typically does not specify a maximum amount that can be borrowed
False
The Fair Reporting Act limits the sharing of credit information
TRUE
Which of the following is NOT one of the three primary credit bureaus? a. Equifax b. Experian C. Transunion d. Fair Isaac Corporation
D Fair Isaac Corporation
9) As of November 14, Ben has an outstanding credit card balance of $1,100 from purchases made over the past month. The new billing period begins on November 15. Assume Ben's outstanding balance for the first 15 days of this new billing period (Nov. 15-29) is $1,100. Then on November 29, the financial institution receives a payment of $600 from Ben, reducing his balance to $500. This is the balance for the remaining 15 days. Using the average daily balance method and a monthly interest rate of 2.5%, Ben's finance charge would be A) $15.00. B) $12.50. C) $27.50. D) $20.00.
D. $20.00
3) If you discover an error on your credit card statement, you should not pay any portion of the balance until the matter has been resolved.
FALSE
3) You should invest in risky investments instead of paying off your credit card debt because the return might be higher than the cost of financing.
FALSE
4) A disadvantage to credit cards is that there is no way to keep track of individual expenditures.
FALSE
4) If you have credit problems, you should contact a credit repair service instead of trying to resolve the issues yourself.
FALSE
4) The Bureau of Consumer Financial Protection was created in 2010 to ensure that credit card companies are treated fairly.
FALSE
5) There is no cost to the merchant when you use a MasterCard or Visa.
FALSE
7) MasterCard and Visa are not accepted by gas stations such as Shell, which issue their own credit cards.
FALSE
7) When applying for a credit card, the amount of savings that you have will not be a factor in the credit card company's decision.
FALSE
8) Because of the short-term nature of credit card lending, the condition of the economy is not considered.
FALSE
8) Creditors are willing to extend credit when the economy is weak to stimulate purchases.
FALSE
9) MasterCard, Visa, and American Express credit cards all allow you to pay only a portion of your amount due and finance the remainder from month to month.
FALSE
Identity theft only occurs though individuals who do not have legitimate access to your information
FALSE
It is always easier to pay back what you borrow than to obtain credit in the first place
FALSE
The equal credit opportunity act allows a creditor to deny credit based on a person's age
FALSE
The longer you maintain relationships with creditors, the lower will be your credit score
FALSE
Unless your identity is stolen by someone out of state, you should only report the cream to local law enforcement
FALSE
Using a shredder to destroy personal data will protect you from shoulder surfing
FALSE
With a credit rating of over 500 you should have no problem getting approval for credit purchases
FALSE
2) A credit card statement will not show the method of calculating finance charges.
FAlse
1) It is good financial planning to pay only the minimum credit card payment and thus maintain a balance since interest rates are low on credit cards. False
False
1) The simple interest rate includes any fees charged by the creditor.
False
Credit issued by department stores for relatively long periods of time is called non-installment credit
False
Funds provided by a borrower that will be repaid in the future, with interest, is credit
False
6) Financial institutions issuing MasterCards and Visas typically earn a high rate of interest on the credit extended.
TRUE
9) One of the disadvantages of credit cards is that they allow you to spend beyond your means.
TRUE
Posing as an employee of a financial institution to obtain information for purposes of identity theft is an example of pretexting
TRUE
The Fair Credit Reporting Act requires credit bureau to correct any erroneous information on your credit report
TRUE
The most important element in FICO credit scoring is your payment history
TRUE
The personal cost of identity theft is difficult to measure, but calculating the financial cost is an easier task
TRUE
Using more credit than can be repaid is a primary cause of individual bankruptcies
TRUE
The cost of using credit may result in ______ spending and ______ debt a. controlled, reduced b. excessive, increased c. excessive, reduced d. controlled, increased
b. excessive, increased
Creditors prefer a _____ level of cash inflows and ______ level of cash outflows a. low, low b. high, low c. high, high d. medium, low
b. high, low
Advantages of using credit are all of the following EXCEPT: a. the ability to cover cash flow shortages b. increases the number of checks written c. the ability to buy large items earlier d. convenience in making day-to-day transactions
b. increases the number of checks written
Improper use of credit may a. increase your ability to save money b. make it necessary to file for bankruptcy c. increase your personal wealth d. all of the above
b. make it necessary to file for bankruptcy
Credit extended to consumers for short periods of time to make specific purchases is a. installment credit b. non-installment credit c. revolving open-end credit d. minimum limit credit
b. non-installmentcredit
Historical credit problems remain on a credit bureau's report for ________ years while a bankruptcy remains for _______________ years a. ten, twenty b. seven,ten c. eight,fifteen d. five,ten
b. seven, ten
Very high credit scores are considered anything over _____
700
The minimum credit score required by financial institutions a. varies by institution b. is 500 c. is 550 d. is 600
A. varies by institution
Which of the following will NOT be included on your credit report? a. Social Security Number b. FICO score c. Unpaid accounts d. companies that have recently acceded your report
B . Fico score
The item that receives the most weight in the FICO credit scoring system is: a. the amount of credit used each month b. credit payment history c. credit utilization d. credit inquiries
B. credit payment history
Identity theft occurs when an individual obtains without your permission, all of the following information EXCEPT: a. social security number b. date and place of birth c. drivers license number d. bank account number
B. date and place of birth
Identity thieves that have systematically infiltrated corporations and financial institutions in order to facilitate large-scale identity thefts are usually a part of a. the federal trade commission b. the internal revenue service c. a well organized crime ring d. a political party
C. a well organized crime ring
If you refrain from using any credit, it will assure you the lowest possible interest rate when you decide to use it
False
If you receive a phone call that seeks to verify or update personal information you should a. ask several questions of the solicitor to verify their authenticity b. ask to speak to a supervisor c. obtain their name and address in case you need to contact them in the future d. obtain their name and phone number and call them back to verify their credentials
D. obtain their name and phone number and call them back to verify their credentials
If you are making a purchase that you know that you will to be able to pay off for a relatively long period of time,you should seek which type of credit and why
Installment credit. It is designed for a longer repayment period with structured monthly payments of princiapal and interest
Paying your phone bill and electric bill onetime each month will help you to establish a ________
credit history
Which of the following items should NOT be removed from your wallet? a. social security card b. birth certificate c. infrequently used credit cards d. drivers license
D. drivers license
Students graduating from college today have an average debt of less than $1,000.
FALSE
Excessive use of credit can impair your ability to save money
TRUE
Federal law requires creditors to explain the reasons for the denial of credit
TRUE
For creating credit scores, credit bureaus rely on a model created any the Fair Isaac Corporation
TRUE
Historical credit problems normally remain on a credit bureau's report for seven years and ten years for bankruptcy
TRUE
If you are a victim identity theft, you may be turned down for implements a result of incorrect background information
TRUE
If you find that you will not be able to make credit payments on time, the best course of action is to immediately notify the creditor
TRUE
Most identify theft victims discover the crime in a reactive as opposed to a proactive manner
TRUE
Discuss at least three disadvantages of using credit
a. high cost of using credit b. difficulty in repayment c. impulse purchases that you cannot afford d. reduces your ability to save e. potential bankruptcy
Which of the following is NOT a disadvantage of using credit? a. makes it easier to save b. the potential high cost c. the difficulty in paying back loans d. the potential for personal bankruptcy
a. makes it easier to save
Discuss the factors that are use din determine credit scoring int he FICO model
a. paying your bills on time over the past severn years b. the amount of credit used each month c. length of relationship with creditors d. number of recent credit inquiries
Which of the following is the least common manner in which an identity theft victim discovers the crime? a. routine examination fo a credit report b. receiving a collection notice c. being denied credit d. reviewing a credit card statement
a. routine examination of a credit report
Credit scores in the 500-600 range will result in: a. lower interest rates b. higher interest rates c. automatic acceptance of your credit application d. preferential treatment of your application
b. higher interest rates
2) If your credit card company decides to increase your interest rate, they must notify you 30 days in advance.
FALSE
2) The previous balance method takes into account the time that you pay off any part of the outstanding balance.
FALSE
2) You should discontinue any credit card that is not sponsored by a company that sells necessities.
FALSE
6) Credit cards can eliminate the need for carrying large amounts of cash.
TRUE
6) You have a credit card on which your beginning balance for the month was $400. On the 10th of the month you took out a cash advance of $500. During the month you made purchases of $250. Assuming that the interest rate on purchases is 15% (1.25% per month), cash advances is 18% (1.5% per month), and there is a 1% fee on all cash advances, what would you have to pay to pay off your account if your due date is the 30th of the month. A) $1,165.00 B) $1,222.50 C) $1,305.00 D) $1,342.50
A
9) Assuming you were charged simple interest of 5% on a loan of $1,000 which requires you to repay in two payments, one at the end of the first six months and one at the end of the second six months, total payments on the loan would be A) $1,037.50. B) $525.00. C) $512.50. D) $1,000.00.
A. $1,037.50
14) John is considering pursuing one of two credit cards. Credit card "A" has no annual fee and charges an interest rate of 12.5%. Credit card "B" has an annual fee of $45 but charges an interest rate of 9%. If John is likely to have an average credit card balance of $2,000, the lowest annual expenses John could have with one of these two cards would be A) $225. B) $180. C) $250. D) $240.
A. $225.
6) Jill just borrowed $6,000 and will be charged a simple interest rate of 12 percent. Jill will pay ________ interest for borrowing the money on September 1 and repaying the money on December 31. A) $240 B) $420 C) $720 D) $1,200
A. $240.
35) All of the following are true of prestige credit cards except they A) always have considerably higher annual fees. B) are sometimes referred to as gold or platinum cards. C) provide extra benefits to cardholders. D) are given to individuals who have an exceptional credit standing.
A. always have considerably higher annual fees
Which of the following will NOT protect you from identity theft while on vacation? a. carry all credit cards, passports, and birth certificates with you b. have your mail stopped c. do not leave credit slips in restaurants d. do not leave sensitive information in your hotel room when you are not there
A. carry all credit cards, passports, and birth certificates with you
21) In comparing credit cards to other forms of credit, which of the following is true? A) Credit cards are generally the most expensive form of credit. B) You should invest funds before paying off your credit cards. C) It is prudent to borrow from some cards to pay off other credit cards. D) All of the above.
A. credit cards are generally the most expensive form of credit
Which of the following is the best rule to follow in shredding information? a. if you have any questions, shred it b. anything with your name and address on it received through the mail c. only items received from your bank or brokerage firm d. any item received that is first class mail
A. if you have any question, shred it
Manipulating email viruses and host files to redirect users fromlegitixate commercial Web sites to bogus web sites to obtain log in names and passwords is referred to as a. pharming b. phishing c.skimming d.trolling
A. pharming
7) Which of the following methods of calculating finance charges on credit cards is least favorable to the cardholder? A) Previous balance method B) Ending balance method C) Average daily balance method D) Adjusted balance method
A. previous balance method
If a person obtains your credit card number by standing close enough to you to either see your credit card or hear you speak the number during a telephone call,they are a. shoulder surfing b. dumpster diving c. pretexting d. skimming
A. shoulder surfing
34) Which of the following is not true about annual fees on credit cards? A) The fees are the same on all credit cards. B) The fees may be high, up to $70 per year. C) Many cards do not have annual fees. D) Some cards may waive the fees for individuals who pay their credit card bills in a timely manner.
A. the fees are the same on all credit cards
14) Credit cards have all of the following advantages except A) they allow you to borrow cash interest free for 60 days. B) make purchases without carrying cash. C) obtain free financing until the bill is due. D) itemized monthly statement.
A. they allow you to borrow cash interest free for 60 days
37) Which of the following is not true regarding cash advances on credit cards? A) They are treated just like other charges on your credit card. B) There is a charge for interest from the time you take the advance to the time you pay it off. C) There is also a transaction fee on most cash advances. D) The grace period does not apply to cash advances.
A. they are treated just like other charges on your credit card
6) By reviewing your credit card statement, you can determine all of the following except A) total purchases made year-to-date. B) your available credit remaining. C) if a payment can be made that will avoid interest charges. D) how much time you have to make a payment.
A. total purchases made year to date
25) Which of the following are good tips on the use of a credit card? A) Treat it as a means of convenience B) Use it as a source of funds C) Make the minimum required monthly payment D) All of the above
A. treat it as a means of convenience
30) The Identity Theft and Assumption Deterrence Act has designated which federal agency as the central clearinghouse for all identity theft complaints? A) FBI B) CIA C) FTC D) WPA
A. use our cell phone to place credit card orders
31) Which of the following would not be contacted in all cases of identity theft? A) Local law enforcement B) Federal Trade Commission C) Postal Inspection Service D) The three major credit bureaus
A. use your cell phone to place credit card orders
29) When making purchases on line, you can take all of the following steps to recognize and avoid identity theft except A) use your cell phone to place credit card orders. B) use a secure browser. C) read the privacy policies of the web sites you visit. D) don't download files sent to you by strangers.
A. use your cell phone to place credit cards
28) A credit card whose interest rate changes as a specific market interest rate changes is said to have a A) variable rate. B) fixed rate. C) constant rate. D) tiered rate.
A. variable rate
5) New regulations that provide clearer and more favorable financing rules for individual credit card users do all of the following except A) prohibit interest rate increases if you miss a payment on another credit card. B) cap the amount of any increase to 5%. C) require a 45 day notice of any credit card interest rate increase. D) prohibit the rate on existing credit card balances from being increased unless you are at least 60 days late on payments.
B
11) As of November 14, Ben has an outstanding credit card balance of $1,100 from purchases made over the past month. The new billing period begins on November 15. Assume Ben's outstanding balance for the first 15 days of this new billing period (Nov. 15-29) is $1,100. Then on November 29, the financial institution receives a payment of $600 from Ben, reducing his balance to $500. This is the balance for the remaining 15 days. Using the adjusted balance method and a monthly interest rate of 2.5%, Ben's finance charge would be A) $15.00 B) $12.50 C) $27.50 D) $20.00
B. $12.50
8) Compute the new balance on a credit card assuming that: ∙ Beginning balance = $450 ∙ Purchases during the month = $300 ∙ Payments made within the grace period = $250 ∙ Interest rate = 18% A) $550 B) $503 C) $516 D) $1,000
B. $503.
11) What is the interest cost and the total amount due on a six-month loan of $1,500 at 13.2% simple annual interest? A) $99; $1,500 B) $99; $1,599 C) $198; $1,698 D) $198; $1,500
B. $99, $$1599
8) Assuming you were charged simple interest on a loan of $4,900 which requires you to repay in one year $5,292, what rate of interest would you be charged? (Round interest rate to the nearest hundredth percent if necessary.) A) 9.26% B) 8% C) 7.41% D) 11%
B. 8%
Question Status: Previous edition 15) Which of the following personal information would not be asked on a credit card application? A) Cash inflows B) Country of birth C) Capital and collateral D) Cash outflows
B. Country of Birth
32) In securing a credit card you should try to obtain A) the highest maximum limit possible. B) a maximum limit high enough to cover necessary monthly purchases. C) a maximum limit high enough to cover anything you might wish to purchase. D) the lowest maximum limit possible to restrict your usage.
B. a maximulm limit high enough to cover necessary monthly purchases
23) For good financial management, you should treat a credit card as A) a source of funds. B) a means of convenience. C) a way to finance everything. D) an inexpensive form of financing.
B. a means of convenience
33) Which of the following may not be a feature of some credit cards? A) Credit limits B) Annual fees C) Grace periods D) Cash advances
B. annual fees
5) On a credit card, a finance charge is applied to A) any purchase. B) any balance not previously paid. C) current purchases. D) future purchases.
B. any balance not previously paid
36) All of the following are true of the grace period on credit cards except it A) is usually about 20 days. B) applies only to cash advances. C) is the time in between the time the statement is "closed" and the time the bill is due. D) amounts to free credit time.
B. applies only to cash advances
Obtaining information in order to steal your identity for condiments discarded any your bank is an example of a. shoulder surfing b. dumpster diving c. pretexting d. skimming
B. dumpster diving
6) Which of the following is not a method by which financial institutions calculate finance charges on credit cards? A) Previous balance method B) Ending balance method C) Average daily balance method D) Adjusted balance method
B. ending balance method
16) Which of the following personal information should not be asked on a credit card application? A) Stocks and bonds owned B) Income of parents C) Employment history
B. income of parents
Which of the following sttementsis NOT true regarding reviewing your credit report? a. your will be able to determine if any errors have been made so they can be corrected b. it will help determine if there are credit cards that you should apply for to improve your credit standing c. it will reveal the kind of information that lenders will consider when making a decision to extend credit d. will reveal deficiencies that you can work to eliminate that will improve your credit rating
B. it will help determine if there are credit cards that you should apply for to improve your credit standing
27) If a credit card has a provision allowing you to make purchases beyond the stated credit limit, it is referred to as A) purchase protection plan. B) overdraft protection. C) grace period. D) first forgiveness provision.
B. overdraft protection
Using email messages from a legitimate source to obtain account information for the purpose of identity theft is referred to as a. pharming b.phishing c. skimming d. trolling
B. phishing
24) Credit has its advantages and disadvantages. Which of the following is false? A) Credit cards should be used with discipline. B) You should spend up to the limit on all your credit cards. C) Cash advances are available through a credit card. D) Bankruptcy is the worst-case scenario from poor credit management.
B. you should spend up to the limit all your credit cards
Free credit reports are accessible to all U.S. consumers at a. www.creditreport.com b. www.freecreditreport.com c. www.annualcreditreport.com d. www.experian.com
C
26) Some credit card companies will waive the annual fee on a credit card if A) you use the card infrequently. B) you carry a large balance from month to month. C) you pay your bills in a timely manner. D) Credit card companies never waive annual fees.
C you pay your bills in a timely manner
7) All of the following are provisions of the Credit Card Act of 2009 except A) cardholders must be given at least 21 days from the day in which the bill is mailed to make a payment. B) cardholders less than age 21 must show proof of their income. C) cardholders can spend beyond the limit imposed on the credit card. D) promotional interest rates must be offered for a period of at least six months.
C.
10) As of November 14, Ben has an outstanding credit card balance of $1,100 from purchases made over the past month. The new billing period begins on November 15. Assume Ben's outstanding balance for the first 15 days of this new billing period (Nov. 15-29) is $1,100. Then on November 29, the financial institution receives a payment of $600 from Ben, reducing his balance to $500. This is the balance for the remaining 15 days. Using the previous balance method and a monthly interest rate of 2.5%, Ben's finance charge would be A) $15.00. B) $12.50. C) $27.50. D) $20.00.
C. $27.50
10) Bill borrowed $3,600 and will be charged a simple interest rate of 18%. Bill will pay ________ interest for borrowing the money on April 1 and repaying the money on December 31. A) $468 B) $648 C) $486 D) $162
C. $486.
7) If you borrowed $8,700 at 6% for one year, what would your total interest be if you are charged simple interest? A) $600 B) $9,222 C) $522 D) $600
C. $522.
13) You are considering applying for one of two credit cards. Credit card "A" has an annual fee of $30 and charges interest of 10 percent. Credit card "B" has no annual fee, but charges an interest rate of 15 percent. If you carry an average balance of $500 on your credit card, the lowest total annual expenses you could have with one of these two credit cards would be A) $50. B) $80. C) $75. D) $90.
C. $75.
A credit rating (score) of __ would normally allow you to have easy approval for credit a. 500 b. 600 c. 700 d. 1,000
C. 700
30) Which credit card requires full payment each month? A) MasterCard B) Visa C) American Express D) A proprietary card
C. American Express
5) APR means A) actual percentage rate. B) applied percentage rate. C) annual percentage rate. D) all-banks percentage rate.
C. annual percentage rate
11) The easiest way to establish credit is to A) purchase a new car with a car loan. B) purchase a house with a mortgage. C) apply for a credit card. D) pay cash for all your purchases
C. apply for a credit card
Which of the following would NOT help improve your credit score? a. reducing unnecessary expenditures b. destroying some credit cards c. applying for more credit cards d. notifying creditors of late payments
C. applying for more credit cards
Generally the ____ the credit history, the _____ the credit limit a. better,lower b. worse, higher c. better, higher d none of the above
C. better, higher
22) In comparing credit cards to other forms of credit, which of the following is false? A) Credit cards are generally the most expensive form of credit. B) You should pay the most expensive debt off first. C) Credit cards can be viewed as a source of funds. D) A home equity loan is a way of combining credit card and other debt.
C. credit cards can be viewed as a source of funds
33) If you think that your identity has been stolen, the FTC recommends you do all of the following except A) contact the credit bureaus. B) file a police report. C) destroy all of your credit cards. D) call your creditors.
C. destroy all of your credit cards
32) Which of the following federal agencies should always be notified in the event of identity theft? A) Federal Bureau of Investigation B) Secret Service C) Federal Trade Commission D) Postal Inspection Service
C. federal trade commission
Creditors prefer a ______ amount of capital and _______ collateral in the best of circumstances a. low, low b. high, low c, high, high d. medium, low
C. high, high
28) At your place of employment, which of the following is acceptable? A) Use of your Social Security number as an employee number on your time card B) Inclusion of your Social Security number on your employee identity badge C) Inclusion of your Social Security number on your payroll registry in the accounting office D) Inclusion of your Social Security number on your paycheck
C. inclusion of your social security number on your payroll registry int he accounting office
Which of the following is NOT a factor in the FICO credit scoring? a. credit utilization b. length of relationship with creditors c. marital status d. number of inquiries
C. marital status
Credit cards are generally used or such purchases as a. cars b. homes c. meals, clothing, and groceries d. stocks
C. meals, clothing, and groceries
On your credit card statement,,the amount that you owe the financial institutions is called the
C. new balance
4) Which of the following is not a method for computing interest on credit cards? A) Previous balance method B) Average daily balance method C) Present value of future payment method
C. present value of future payment method
Posing as an employee of a brokerage firm to obtain information to allegedly update your account information is an example of a. shoulder surfing b. dumpster diving c. pretexting d. skimming
C. pretexting
3) If you find yourself with an excessive credit card balance, the first thing you should do is A) borrow funds from family members. B) quit school and get a job. C) spend as little as possible. D) file for personal bankruptcy.
C. spend as little as possible
17) In applying for a credit card, the potential creditor will look at your ________ to determine if you have funds to cover future debt payments if necessary.
Capital
18) Describe the availability of credit today for a person over 18 years of age. Do you get credit card offers in the mail and are discounts available when signing up for a proprietary credit card?
Credit is available everywhere and easy to obtain. Many stores offer a 10% discount on purchases just to sign up for their credit card and credit card offers through the mail are numerous.
6) Credit card companies' fees cannot exceed ________of the initial credit limit. A) more than 5% B) more than 10% C) more than 50% D) more than 25%
D
7) Suppose you have a credit card balance of $500 that you were unable to pay off. During the current month you purchase another $250 worth of products. You made a payment during the grace period of $300. Assuming your retail credit card company charges an annual interest rate of 22%, compute your new balance. A) $450 B) $250 C) $494 D) $294
D. $294
12) Sandy had a beginning balance on her MasterCard statement of $300. This month she had purchases of $400, payments of $300, and a $100 cash advance. To avoid interest charges, Sandy must make a payment of A) $400. B) $500. C) $100. D) Sandy cannot avoid interest charges.
D. Sandy cannot avoid interest charges
39) Which of the following is not correct about cash advances? A) There is no grace period for cash advances. B) The interest rate for cash advances is higher than for purchases. C) A cash advance is like a loan. D) A transaction fee of 5% may be charged. Answer: D
D. a transaction fee of 5% may be charged
12) In applying for a credit card, the potential creditor will look at which of the following as a source of future debt payments if necessary? A) Cash outflows B) Credit history C) Potential inheritances D) Balances in savings accounts
D. balances in savings accounts
Which of the following may result in much of your personal financial information becoming part of the public record? a. marriage b. applying for financial aid at a college c. purchasing a house with a mortgage d. divorce
D. divorce
38) Cash advances are A) a good way to finance your purchases. B) cheaper than a line of credit. C) not shown on the credit card statement. D) easy to make at an ATM machine.
D. easy to make at an ATM machine
31) All of the following are disadvantages of having proprietary credit cards except A) your purchases are limited to a single merchant per card. B) you may need several credit cards. C) you receive several billing statements. D) it takes considerable time to process your application to allow you to begin obtaining credit.
D. it takes considerable time to process your application to allow you to begin obtaining credit
The safest way to order merchandise using a credit card is by a. cell phone b. computer c. hand held phone d. land line phone
D. land line phone
29) Credit cards with a tiered interest rate charge cardholders who A) carry large balances a lower rate. B) pay off their balance monthly a higher rate. C) make early payments a higher rate. D) make late payments a higher rate.
D. make late payments a higher rate
The safest way to obtain new checks is to a. have them mailed first class to your house b. have them mailed first class to your work c. have them sent via United Parcel Service d. pick them up at the bank
D. pick them up at the bank
8) The ________ method charges interest based on the balance at the beginning of the new billing period. A) new cycle B) adjusted balance C) average daily balance D) previous balance
D. previous balance
40) In comparing credit cards, which of the following is false? A) Some cards are more widely accepted than others. B) Some cards offer a teaser interest rate. C) Some charge an annual fee and others do not. D) Some cards allow you to carry a balance from month-to-month with no interest.
D. some cards allow you to carry a balance fro month month with no interest
4) A credit card statement does not contain which of the following? A) Previous balance B) Current balance C) Account number D) Who purchased the item
D. who purchased the item
The federal law that prohibits the denying of credit based on gender, age, race, natural origin, religion, or marital status is the ________
Equal Credit Opportunity Act
______, _____, and _____ are the three major credit bureaus
Equifax, Experian, TransUnion
14) Prestige cards (gold or platinum cards) always charge a higher annual fee, but offer extra benefits such as free insurance on rental cars or special warranties on purchases
FALSE
16) The interest charged on purchases and cash advances on credit cards is computed in the same way.
FALSE
2) Credit cards are commonly used for purchases such as clothing, car repairs, or the purchase of a new car.
FALSE
1) A credit card statement lists purchases that were made with the credit card as well as any balance carried forward from the previous statement.
TRUE
1) A self-imposed credit limit indicates that you will use a credit card only if you will have the cash to cover the payment when you receive your credit card statement.
TRUE
1) Congress has passed regulations that protect consumers who use credit card services.
TRUE
1) Finance charges apply only to balances that were not paid in full before their due date in the current billing period.
TRUE
1) Identifying specific goals for managing your credit is an important part of your personal financial plan.
TRUE
1) It is not difficult to find a credit card company that is eager to extend credit to you.
TRUE
10) An alternative to MasterCard, Visa, and American Express credit cards is a retail or proprietary card that is issued for use at a specific retail establishment.
TRUE
10) One advantage of using a credit card is that you receive a list of your purchases, which enables you to keep track of your spending.
TRUE
11) One disadvantage of a proprietary credit card is that it limits your purchases to a single merchant.
TRUE
12) Credit limits may be as high as $10,000 for those credit card holders who have an exceptional credit history.
TRUE
13) There are many incentives, such as discounts and bonuses, offered by credit card companies to get you to use their cards.
TRUE
15) If you pay your total credit card amount before the grace period, you are not normally charged any interest.
TRUE
17) Cash advances on credit cards normally cost you interest from the date of the advance and also a transaction fee of 1 to 2 percent.
TRUE
18) Some credit cards offer card users cash rewards if they exceed a certain spending level each month.
TRUE
19) The annual percentage rate (APR) on credit is the simple interest rate after including any fees (such as an application processing fee) imposed by the creditor.
TRUE
2) The interest you pay when using credit cards can have a major impact on the total amount you owe.
TRUE
2) To properly manage your money you should use a credit card only if you will have the cash to cover the payment when you receive your credit card statement.
TRUE
20) The annual percentage rate (APR) is useful because it allows you to easily compare financing costs among various possible creditors.
TRUE
3) Because credit card interest rates are usually quite high, you should pay off your credit card balances before you invest funds anywhere else.
TRUE
3) If it takes you four years to pay off a loan, you have to pay the annual interest four times.
TRUE
3) One advantage of credit cards is that you can receive free financing if you pay off your balance each month.
TRUE
3) Your credit card statement must state how long it will take you to pay off the existing balance due when paying only the minimum amount each month.
TRUE
4) Even if you cannot pay your credit card bill in full, you should still attempt to pay as much as possible so that you can minimize finance charges.
TRUE
5) Advantages of using credit include the ability to make purchases when cash inflow is low and the convenience of not carrying cash or checks.
TRUE
5) If you have exhausted all efforts to resolve an excessive credit card balance, personal bankruptcy may be your only option.
TRUE
In order to have credit in the future, you must have used it wisely in the past
True
The average credit card balance of undergraduate students is between a. $3,000 & $7,000. b, $1,000 & $3,000. c.$7,000. & $ 10,000. d. $12,000 & $15,000.
a. $3,000. & $7,000.
What steps can you take to improve your credit score?
a. catch up late payments b.refuse unnecessary expenditures c. destroy credit cards to reduce temptation d. notify creditors of late payment to work out arrangements
Which of the following can be used by a creditor in deciding whether or not to grant credit? a. credit history b. race c. gender d. both a & c
a. credit history
Of the following statements,which is NOT an advantage using credit? a. credit creates stability and allows you to establish a favorable credit history b. buying today and paying tomorrow seems ideal, but continual spending can lead to financial problems c. using credit is safe since charge accounts and credit cards let you shop and travel without carrying large amounts of cash d. credit cards permit the purchase of goods even when cash funds are low
b. buying today and paying tomorrow seems ideal, but continual spending can lead to financial problems
A commitment to cover credit repayments under adverse conditions scubas accident or illness is called: a. accident insurance b. credit insurance c. health insurance d. unemployment insurance
b. credit insurance
The impact of credit _____ saving and _____ soebdubg a. increases, decreases b. decreases, increases c. decreases, decreases d. credit has no relationship on saving and spending
b. decreases, increases
42) If you have an exceptional credit standing, the company issuing your credit card may upgrade you to what are called ________.
prestige cards
The law that prohibits denying credit due to gender, age, race, natural origin, religion, or marital status is a. fair labor standards act b. the fair isaac act c. equal credit opportunity act d. fair treatment of borrowers act
c equal credit opportunity act
Which of the following is NOT true regarding revolving open-end credit? a. credit cards are an example of it b. a specific maximum amount of credit is established c. if the balance is not paid off over a period of months, a penalty is incurred d. interest is charged no the remaining balance each month
c. if th balance is not paid off over a period of months, a penalty is incurred
The average individual loss as a result of identity theft has in recent years been a. decreasing b. staying the same c. increasing d. no pattern is discernible
c. increasing
Of the following statement, which is NOT a disadvantage of using credit? a. it can be costly to use b. it can be difficult to repay c. it is more difficult to obtain than repay d. it may tempt you to make impulse purchases
c. it is more difficult to obtain than repay
Which of the following will NOT help you establish a good credit history? a. paying your phone bill on time b. financing a car and making payments onetime c. making as many purchases as possible with cash d. never exceeding your credit limit on your credit card
c. making as many purchases as possible with cash
Which of the following is a disadvantage of using credit? a. ease of returning merchandise b. shopping convenience c. slowing of progress toward financial goals d. capacity to access credit int he future
c. slowing of progress toward financial goals
the most important factor used int eh FICO credit scoring model
credit payment history
document showing information reporting your payment history and past use of credit
credit report
All of the following are correct statements about credit EXCEPT: a. creditor provides funds b. credit needs to be paid back int he future c. repayment will include interest d. the interest is the total amount to be repaid
d, the interest is the total amount to be repaid
All of the following situations are valid reasons to borrow funds except: a. a medical emergency b. a college education c. purchasing a car in order to return to the workforce d. borrowing for every day living expenses
d. borrowing for every day living expenses
The ability to save funds is ____ when credit payments are ________ a. increased, small b. reduced, small c. reduced, large d. both a & c are correct
d. both A & C are correct
Which of the following statements is true regarding non-installment credit? a. the borrower has a longer time to repay b. monthly payment sof principal and interest must be paid c. the borrower has an unlimited amount of credit d. credit is usually issued for 30 days or less
d. credit is usually issued or 30 days for less
43) The ________ is usually about 20 days after the credit card statement is closed.
grace period
A borrowing arrangement in which regular monthly payments of principal and interest must be made
installment credit
____ is short term credit provided by some department stores to consumers to purchase specific items
non-installment credit
41) A credit card that can only be used in establishments of the issuer is called a(n) ________ credit card.
retail or proprietary
