764 Exam 2
accounts are covered by the FDIC up to $_____
$250,000
five C's of credit management
- character - capacity - capital - collateral - conditions
three types of credit insurance
- credit life - credit accident & health - credit property
financial institutions must disclose the following information on savings accounts (4)
- fees - interest rate - annual percentage yield (APY) - any other terms and conditions of the plan
three most common types of closed-end credit
- installment sales credit - installment cash credit - single lump sum credit
places you should never go for a loan (5)
- pawnshop - check-cashing outlets - payday loans - rent-to-own centers - car title loans
debt payments-to-income ratio should not exceed _____%
20%
the prime rate is usually _____% higher than the discount rate
3
debt-to-equity ratio should not exceed _____%
30%
credit scores are generally between _____ and _____
300 - 850
EE Bonds are _____-year bonds and are a tax-__________ investment
30; deferred
if your credit application is denied, you can get a free copy of your credit report within _____ days
60
you must notify the creditor of a billing error in writing within _____ days of the error and the creditor must acknowledge your letter within _____ days
60; 30
you must wait _____ years between bankruptcies to file again
8
places the burden of proof for accurate credit information on the credit reporting agency rather than you
Consumer Credit Reporting Reform Act of 1997
places new restrictions on credit card lending and eliminates certain fees
Credit Card Accountability, Responsibility, and Disclosure Act 2009
money deposited into a credit union is not insured by the FDIC but by the __________
NCUA (National Credit Union Association)
the Fair Debt Collections Practices Act prohibits certain practices by __________ that collect debts for __________ but does not apply to __________ who collect debt themselves
agencies; creditors; creditors
the __________ rate is always higher than the interest rate
annual percentage (APR)
the _______________ adds in any additional fees charged by the lender
annual percentage rate (APR)
funds __________ covered by the Federal Deposit Insurance Corporation and accounts __________ covered (are/are not)
are not; are
an _______________ account or _______________ account is warranted when you have so much that you cannot manage it so a firm manages all of it and charges you for this service
asset management; cash/wealth management
definition of callable
can be called back at any time
use Kelly's Blue Book for __________ price negotiations
car
check issued by bank removing funds from your account plus a fee and the recipient knows the check is valid
cashier's check
a savings plan requiring that a certain amount of funds be left on deposit for a stated time period ranging from 30 days to five years or longer
certificate of deposit
personal check but funds are removed from your account at the time the bank certifies your check
certified check
two types of credit
closed-end and open-end
APY can also be viewed as the frequency of __________
compounding
interest that is earned on previously earned interest
compounding
credit used for personal needs
consumer credit
commercial banks are organized as a __________ with __________
corporation; investors
an arrangement to receive cash, goods, or services now and pay for them in the future (obligating future earnings)
credit
ensures the repayment of your loan in the event of death, disability, or loss of property
credit insurance
mutual savings banks are owned by __________
depositors
the Federal Reserve changes the __________ rate
discount
the rate financial institutions are charged to borrow funds from the Federal Reserve
discount rate
the rate of return or yield is the same thing as your __________
earnings
electronic EE bonds are purchased at __________ value
face
I bonds have an interest rate based on two components: a __________ rate for the life of the bond and an __________ rate that changes twice a year
fixed; inflation
the __________ (further apart/closer together) the interest rate and APR, the __________ (less/more) fees you are paying for that loan
further apart; more
the __________ (further apart/closer together) the interest rate and the APY, the __________ (less/more) frequently it will be compounded and the __________ (smaller/greater) the yield
further apart; more; greater
one of the biggest advantages of credit is the __________ period
grace (float)
the yield (earnings) on your savings usually will be __________ than the stated interest rate (lower/higher)
higher
consumer credit does not include a _______________
home mortgage
credit arrangement that has no extra costs and no specific repayment plan
incidental credit
when interest rates are rising, take advantage of _____-term loans and _____-term savings (short/long)
long; short
debt payments-to-income ratio
monthly debt payments (not including mortgage) / net monthly income
occurs when the value of an asset is less than the outstanding balance on the loan
negative or upside-down equity
mediation
negotiation to resolve differences conducted by some impartial party
who can obtain your credit report?
no one without your written consent unless court-ordered
one of the biggest disadvantages of credit
overspending
a checking account is an example of a __________ service
payment
__________ for withdrawing the funds from a certificate of deposit before maturity are significant
penalties
with closed-end credit, you have a fixed __________ , fixed __________ , and fixed __________
period of time; payment; interest rate
with open-end credit, you have no fixed __________ , no fixed __________ , and no fixed __________
period of time; payment; interest rate
if your identity is stolen, make sure to file a __________
police report
beware of __________ sales agreements when it comes to purchasing a vehicle
pre-printed
an indication of the rate banks charge large corporations
prime rate
FDIC and NCUA provides insurance for certain __________ accounts
retirement
a mistake commonly made is using __________ to pay current expenses
savings
savings and loans banks specialize in __________ and __________
savings and home mortgages
another name for extended warranty
service contract
arbitration
settling a dispute by agreeing to accept the decision of an impartial outsider (legally binding)
at a credit union, an example of a savings account would be a __________ account
share
when interest rates are falling, take advantage of _____-term loans and _____-term savings (short/long)
short; long
the __________ (shorter/longer) the loan, the __________ (lower/higher) the interest
shorter; lower (and vice versa)
plastic card with a built-in microprocessor, used typically for electronic processes such as financial transactions and personal identification
smart-card
debt-to-equity ratio (does not include the value of your home or the mortgage)
total liabilities / net worth
a __________ is a legal agreement that provides for the management and control of assets by one party for the benefit of another
trust
law in which creditors are required to state the cost of borrowing as a dollar amount so that consumers know exactly what the credit charges will be
truth in lending law of 1969
earnings from savings bonds are taxable income unless used for _______________ at a college, university, or technical school for you or a dependent
tuition and fees (unless you make too much money)
credit unions are _____-owned, _____ profit (for/non) cooperative financial institutions
user; non
__________ interest rates change during the life of the loan
variable
a written guarantee from the manufacturer or distributor that specifies the conditions under which the product can be returned, replaced, or repaired
warranty
a merchant will take something back if it doesn't perform the function it was advertised to perform under this warranty
warranty of merchantability
a guarantee by a seller to a buyer that the seller has the right to transfer ownership and no one else has rights to the property
warranty of title
an expressed warranty is a __________ warranty
written
