Personal Finance Credit Test

Approximately, what is the annual finance charge for each $100 owed on a credit card with a 16% annual interest rate (APR)?

$16.00

Suppose you are renting a living room suite for $9.95 per week. After you rent it for 40 weeks, the rent-to-own company says you can own the furniture. How much do you have invested?

$398

One of Andre's seldom-used credit cards has been stolen without his knowledge. When he gets his monthly statement, he realizes that someone else has been using the card and reports it stolen. The maximum amount of the unauthorized purchases he is he liable for is:

$50

If you have been denied credit, a job, a license, an insurance policy, or a loan based on your credit report. You are entitled to receive a free copy of that credit report within how many days of denial?

60

Why is maintaining a good credit history important to your future?

A good credit history can help your obtain a job, or a loan.

What is a credit score?

A number used to determine how much credit to extend to a person.

The type of credit card issued by an oil company, bank, or department store is:

A revolving charge card

Six months ago Felix purchased a home entertainment system. A local finance company granted Felix the credit necessary to make the purchase. Felix signed the loan contract and had the system delivered to his home. For eight months, Felix made the regularly scheduled payments on the loan. In the ninth month, however, he went out of town neglecting to make his loan payment on time. When he returned from the trip, Felix received a letter from the finance company demanding payment in full or he would have to return the entire system. What did Felix's credit contract include?

Acceleration clause

You used your credit card to buy flowers at the florist. The dollar amount of the purchase was:

Added to your credit card bill and you pay for it at a later date

James and Vanessa both work and own their home. They want to purchase a third vehicle to give their daughter as a college graduation present. What factors will lenders consider in computing James and Vanessa's credit rating in assessing their car loan application? Current Debt, Payment History, Number of Credit Cards, All of the Above

All of the above

Which of the following are sources of credit cards: Visa, Mastercard, American Express, All of the Above

All of the above

A creditor may deny credit because of

Bad credit history

A legal process in which people who cannot pay their debts must surrender most of their property is called ____.

Bankruptcy

Last fall Gretchen traveled out of state to attend college. While registering for her classes she signed up to receive several credit cards. After she received them, she immediately began using them to purchase books, clothes, jewelry, a sound system, VCR, and a television set. After four months of extensive use, Gretchen found herself hopelessly in debt. She had no visible means of paying off her debt. She pursued the legal process in which she surrendered the property to the court; the court then sold the property to help pay her debts. This process is known as ____.

Bankruptcy

How can you protect yourself against credit card fraud?

Be extremely careful about disclosing account information to unsolicited callers.

Judi and Phil had a joint VISA credit card while they were married. They are now divorced. Who is responsible for the balanced owed on the VISA card?

Both Judi and Phil

While attending college full-time, Caleb worked a full-time job at a local restaurant. During those same four years, he lived at the same address remembering to pay his rent and utilities on time. Lenders would look at his lifestyle believing him to be responsible and grant him credit based on Caleb's ____.

Character

A creditor determines your creditworthiness based on:

Character, collateral, and capacity

Most Consumer Credit Counseling Services (CCCS):

Charge a fee for setting up and administering a debt repayment plan

Using someone else's money, promising to repay at a future date, and paying a fee for use of the money, is the definition for:

Credit

A company that collects information about consumers' credit history and sells it to lenders is a _______.

Credit Bureau

The maximum amount you are allowed to charge on your account is the ____.

Credit Limit

A measure of your credit worthiness is your _____.

Credit Rating

Claire got a new credit card from American Bank and wants to cancel her USA credit card. The best method is to dispose of her USA credit card is to:

Cut up the card, put parts in different garbage bags, and instruct the credit card company in writing or by phone to close the account

Consumer Credit Counseling Services (CCCS) offer:

Debt repayment plans

In their native country, Alfonse and Nuccia often found it difficult to obtain credit because banks had different policies for different customers. Because of their race, they expected to have similar difficulties in the United States after their immigration. However, the ______________________________ Act prohibits lenders from refusing credit based on race, color, religion, national origin, sex, marital status, or age.

Equal Credit Opportunity

Troy and Darla were recently denied credit at a local furniture store. A week later they received a letter from the furniture store identifying the credit bureau that supplied the information used in making its lending decision. At this point, Troy and Darla have 30 days to request a free copy of their credit report from that credit bureau. What law created this process giving Troy and Darla and other consumers a way to check their credit reports?

Fair Credit Reporting Act

Orestes was recently struck with a life-threatening illness that required almost two weeks of hospitalization. During this time, Orestes was unable to work. In addition to the lost income, he will still owe over $12,000 as his part of the medical expenses not covered under his health insurance plan. Therefore, he and his wife, Teresa, will not be able to pay many of their credit cards and other loans on time. Debt collection agencies begin calling the couple regularly. One debt collector even followed Teresa to work and embarrassed her at her place of employment. What law prevents debt collection agencies from using such abusive practices?

Fair Debt Collections Practices Act

Married couples should only have credit together, in both of their names. True/ False

False

The total cost a borrower must pay for a loan, including all interest and fees is the ____.

Finance Charge

When Calvin and Gloria financed a new car loan at their credit union, the finance officer provided extensive documentation regarding the specifics of the loan. The documents told them the total cost of the car loan, including all interest and fees. This total cost they will pay for the loan is known as ____.

Finance Charge

Debbie was behind on her stereo installment credit contract payments. As a result, the creditor seized and sold the stereo. The sale price did not cover all of the loan balance, the creditor got a court to order her employer to withhold part of her wages. This court order is called:

Garnishment

The time between the billing date and the payment due date, when no interest is charged, is the ____.

Grace Period

Jim is a college senior with $50,000 in student loans. He earned $2,000 last year. He has no savings so he charged a $5,000 vacation on his credit card. How would you characterize Jim's use of credit?

It is irresponsible use of credit because his current income is too low

Which factor would most likely lead to an increase the interest rate on a person's credit card?

Late payments

Who uses consumer credit reports in making decisions?

Lenders

Jane opened her credit card bill and was surprised by the amount she owed. She cannot pay the full amount of the bill this month. The lowest dollar amount Jane is required to pay by the credit card company is the:

Minimum Payment

Matt's wallet, with all his credit cards, was stolen. He needs to:

Notify each credit card company immediately

Dawn graduated from high school and wants to get a credit card. How can Dawn establish credit-worthiness?

Opening a checking account, making regular deposits, and avoiding penalties for insufficient funds

Ellen, Barbara, and Paul all charged $1,000 on their credit cards last year. Who paid the most in finance charges?

Paul, who only pays the minimum amount each month

Which of the following lenders charge the highest interest rate? A) Bank B) Credit Union C) Pawn Shop D) Finance Company

Pawn Shop

If you want to get cash for personal property such as jewelry or a TV, then you need to see a ____.

Pawnbroker

Madison's credit card payment is due on the 25th of every month. Because the 25th falls between two pay periods, often she is unable to make the regular payment on time. The credit card company charges her $25 each time her payment is late. This charge is known as ____.

Penalty

I-chen Lee recently applied for a charge account at a local department tore. The credit card will allow her to make charges throughout the month on her account; she will not be accessed any interest because she must may the balance in full prior to the 15th day of the next month. What type of account does I-chen Lee have?

Regular Charge Account

Mazher has an account that allows him to charge up to $5,000. Each month, however, he does not have to pay the balance in full. Rather, Mazher makes a $75 minimum monthly payment carrying the remaining balance forward from one month to the next. What type of account does Mazher have?

Revolving charge account

You can continue to charge purchases on your credit card when:

The amount you owe on the card is below your credit limit.

When a borrower fails to repay a loan and there is a co-signer on the loan, the most likely result will be

The co-signer will be held responsible for the repayment of the entire loan plus fees or penalties.

A credit card finance charge is

The dollar amount it cost to use credit

You are behind on your debt payments and go to a responsible credit counseling service, the Consumer Credit Counseling Services. How can they help you?

They can work with those who loaned you money to set up a repayment schedule you can afford to make.

Few people can pay for a home without borrowing. True/ False

True

The Equal Credit Opportunity Act makes it illegal to refuse credit on the basis of race, color, religion, national origin, sex, marital status, or age. True/ False

True

The Fair Credit Billing Act helps consumers correct credit card billing mistakes. True/ False

True

The Fair Credit Reporting Act of 1971 gave consumers a way to check their credit reports. True/ False

True

Each month Sabrina can charge up to $400 on her department store account. This $400 is known as her ____________________.

credit limit

In order for Hugh to avoid paying high interest on his credit card, he could pay the entire balance between the billing date and the payment due date. During this period of time, Hugh will not be charged any interest. This period of time is known as the ____________________.

grace period

A record of your past borrowing and repayments is your credit ____________________.

history

Russ needed money quickly in order to travel home to visit his ill mother. Because he has a poor credit rating, his options for a consumer loan are limited. In order to get a loan, Russ can take his big screen television or other personal property to a(n) ____________________ to obtain the loan he needs.

pawn broker

A loan that is backed by something of value pledged to insure payment is a ____.

secured loan