chapter 6

Most of your debts would be totally discharged under Chapter ____ of the federal bankruptcy law.

7

Which of the following will lead to a poor credit rating?

Applying for a long-term loan and occasionally being late with a payment

_____ is a benefit of using credit cards.

Being able to meet a financial emergency

Personal insolvency can be legally satisfied by:

Chapter 13 bankruptcy

Nancy's take-home income is $3,000 per month, and she currently has a $700 monthly consumer debt. As per the general rules of thumb, ____________.

Nancy cannot take on additional consumer debt as her debt safety ratio is higher than the general criteria

Which of the following can be excluded from a monthly credit card statement?

the type of good purchased

____________ involves some type of debt restructuring by establishing a debt repayment schedule.

the wage earner plan

A debit card looks and works like a credit card.

true

An individual can be overusing credit even if he or she can afford to make the minimum monthly payments on time.

true

Credit should not be consistently used for purchasing nondurable goods.

true

Debit cards are very convenient to use as they work like writing a check.

true

For a fee, credit bureaus can provide credit scores of prospective borrowers.

true

It is recommended that you never give your credit card account number over the phone to people or organizations who call you.

true

One can and should check his or her credit bureau file regularly.

true

One should not use credit to purchase food, clothing, and other nondurables, even if it is only for convenience and the balance will be completely paid upon billing.

true

People who let their credit balances build up are mortgaging their future.

true

Saving is preferred to borrowing when providing for financial emergencies.

true

The majority of persons filing for bankruptcy choose Chapter 7 of the U.S. Bankruptcy Code.

true

The most common method of computing finance charges on a credit card is the average daily balance method including new purchases.

true

The purpose of a credit report is to evaluate the kind of risk you pose to the lender.

true

Families that have a steady source of income and a reasonable chance to repay debts would choose Chapter 13 rather than Chapter 7 of the U.S. Bankruptcy Code.

tue

The finance charges on two credit cards with the same stated annual percentage rate (APR):

will be determined by the methods used to calculate balances.

Most creditors ____________ if you are having difficulty meeting your payments.

will work out a solution

The intent of the Wage Earner Plan is to eliminate all of a debtor's obligations.

false

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?

$480

The key to creditworthiness is to maintain your debt safety ratio at 50 percent or above.

false

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 can they borrow using a home equity loan?

$12,000

Which of the following is true about phishing?

Pretending to be an employee of a financial institution

Which of the following statements is true of retail charge cards?

Retail charge cards are issued by retailers that allow customers to charge goods and services up to a preestablished amount.

Which of the following is true about credit scoring systems?

The whole credit scoring system is based on extensive statistical studies.

Which of the following is the correct expression for calculating the debt safety ratio?

Total monthly consumer credit payments / Monthly take-home pay

A(n) _____ is an agency that provides credit information about individual borrowers to lenders.

a credit bureau

A payment made using _____ is equivalent to paying by cash.

a debit card

If a borrower has a high credit score, then there is ____________.

a high chance of his or her loan getting approved

A borrower who pays his or her account balance in full each month should get a credit card with ____________.

a long grace period

Joe and Jane have a tendency to build up large balances on their credit cards. Which of the following features would be least important to them?

a long grace period

A proper use of open account credit would be to buy ____________.

a washing machine

_____ cards offer the cardholder a way to contribute to a worthy cause and are sometimes described as "credit cards with a cause."

affinity

____________ are the credit cards issued in conjunction with a sponsoring group-most commonly some type of charitable, political, or professional organization.

affinity cards

A straight bankruptcy _____.

allows a debtor to retain some other personal assets as per federal regulations

Which of the following calculation methods would produce more interest income for a person who uses his or her credit card very frequently?

average daily balance including new purchases

which of the following calculation methods would produce more interest income for a person who uses his or her credit card very frequently?

average daily balance including new purchases

Which of the following cards provides direct access to your checking account?

bank debit cards

Which of the following is an improper use of credit?

buying a short-lived good

James finds it difficult to manage credit but wants the convenience of using a credit card. He wants to get a card that will provide direct access to his checking account. James should get a _____.

debit card

The amount of finance charges one pays on a credit card depends only on the annual percentage rate (APR) and the grace period charges.

false

A Chapter 13 bankruptcy filing would result in the discharge of most of your debts.

false

A credit card user's credit rating will be hampered if he or she pays only the minimum monthly payment on a credit card.

false

A retail charge card can be accessed by writing checks against demand deposit.

false

All credit cards have annual fees.

false

Always paying cash helps in establishing a high level of creditworthiness.

false

Credit reports on individual borrowers are provided by credit card issuers.

false

It is safe and is always necessary to give your Social Security number for identification when using a credit card.

false

Overspending will help you manage your budget effectively.

false

Interest will usually begin to accrue immediately when you use a bank credit card to:

get cash advances

Which of the following forms of consumer credit is the cheapest and offers tax shelters?

home equity credit lines

When canceling a credit card, you should cut up the card and _____ that you are canceling your account.

inform the issuer in writing

Which of the following is not essential when a lender analyzes the creditworthiness of a borrower?

lifestyle

William uses his bank credit card frequently; however, he always pays off the total outstanding balance on the card each month. What should William look for in a credit card given the way he uses one?

no annual fee and a long grace period

Anna uses her credit card regularly, but she pays off her total outstanding balance monthly. Anna should look for a credit card with:

no annual fees

Which of the following is a preferred use of a credit card?

occasionally for convenience

The first step in establishing a credit history is to ____________.

open checking and savings accounts

To establish creditworthiness and to have a good credit score, one should probably first:

open savings and checking accounts

Any credit card purchase will effectively be an interest-free loan if you:

pay off the entire balance on or before the due date.

Credit offered in the form of ____________ is most common in department and clothing stores and other high-volume outlets, where customers are likely to make several purchases each month.

retail charge cards

Using ____________ to handle financial emergencies is recommended.

savings

Persons with very poor credit ratings can still get _____ credit cards.

secured

With a bank credit card, one can often avoid interest charges if:

the account balance is paid in full every month

Which of the following does a lender look at before granting credit to a borrower?

the age of the borrower

Consumer credit has become a popular way of making routine purchases because:

the availability of different types of credit is abundant.