Personal Finance Midterm

The percentage cost (or relative cost) of credit on a yearly basis. The APR yields a true rate of interest for comparisons with other sources of credit

Annual Percentage Rate (APR)

The percentage rate expressing the total amount of interest that would be received on a $100 deposit based on the annual rate and frequency of compounding for a 365-day period

Annual Percentage Yield (APY)

An all-in-one account that includes savings, checking, borrowing, investing, and other financial services for a single fee; also called a cash management account

Asset Management Account

Savings accounts in banks are considered a safe investment because?

Banks are insured by the government backed FDIC

A financial institution that offers a full range of financial services for individuals, businesses, and government agencies

Commercial Bank

A process that calculates interest based on previously earned interest

Compounding

The general economic conditions that can affect a borrowers ability to repay a loan

Conditions

The use of credit for personal needs (except a home mortgage)

Consumer Credit

An arrangement to receive cash, goods, or services now and pay for them in the future

Credit

An agency that collects credit information and compiles a credit history for individuals and businesses

Credit Bureau

A user-owned nonprofit, cooperative financial institution that is organized for the benefit of its members

Credit Union

A savings-investment plan offered by investment companies, with earnings based on investments in various short-term financial instruments

Money Market Fund

A financial institution that is owned by depositors and specializes in savings accounts and mortgage loans

Mutual Savings Bank

To minimize your borrowing costs, you can lower the risk to the lender by?

Offering collateral to secure the loan

A line of credit in which loans are made on a continuous basis and the borrower is billed periodically for at least partial payment

Open-End Credit

All of the following are advantages of credit EXCEPT?

Over use of credit can lead to bankruptcy

An automatic loan or transfer from savings to cover the amount you are over drawn in your checking account

Overdraft Protection

Offers an ability to transfer money to others for daily business activities

Payment Services

The fastest growing payment method

Prepaid Debit Cards

All of the following are factors creditors consider to determine credit worthiness EXCEPT?

Race, are you in the preferred group of people

The percentage of increase in the value of savings as a result of interest earned: also called yield

Rate of Return

A prearranged loan from a bank for a specified amount; also called a bank line of credit

Revolving Check Credit

Provides safe storage of funds for future use

Savings

A financial institution that traditionally specialized in savings accounts and mortgage loans

Savings and Loan Association (S&L)

Interest computed on principal only and without compounding

Simple Interest

When reconciling your checking account you should?

Subtract fees and ATM withdrawals but add interest earned and direct deposits to your check register balance

Which of the following decrease the rate of return on your savings?

Taxes

The total dollar amount paid to use credit is?

The finance charge

A legal agreement that provides for the management and control of assets by one party for the benefit of another

Trust

Consumer credit is based on?

Trusting that people will be able to and are willing to pay bills when they are due

Low-risk savings program guaranteed by the federal government

U.S. Savings Bond

When interest rates are rising you should?

Use long-term loans

The difference between Chapter 7 bankruptcy and Chapter 13 bankruptcy is?

With Chapter 7 most of your debt is eliminated and with Chapter 13 your debt is restructured so you can afford the payments

What is a warning sign that you are in financial trouble?

You borrow money to pay off old debts

The simple interest charge for a $1,500 loan with a 6% interest rate paid in 3 equal installments is?

$60

What are the 5 C's of credit?

1. Character 2. Capacity 3. Capital 4. Collateral 5. Conditions

What is the annual percentage yield (APY) on a savings account with $1,500 balance and earns $18 in interest per year?

1.2%

A certificate of deposit is?

A savings deposit that earns higher interest because it is left in the account for a specified period of time

The difference between a debit card and a credit card is that?

A debit card draws funds from your checking or savings account and a credit card is a type of loan

A computer terminal used to conduct banking transactions; also called a cash machine

ATM

The borrower's financial ability to meet credit obligations

Capacity

The borrower's assets or net worth

Capital

Which of the following is an example of closed-end credit?

Car loan

A savings plan requiring that a certain amount be left on deposit for a stated time period to earn a specified interest rate

Certificate of Deposit (CD)

The borrower's attitude toward his or her credit obligations

Character

Which of the following is true about payday loans or cash advance companies?

Charge extremely high interest for their "loans"

One-time loans that the borrower pays back in a specified period of time and in payments of equal amounts

Closed-End Credit

A valuable asset that is pledged to ensure loan payments

Collateral

A plastic access card used in computerized banking transactions; also called a cash card

Debit Card

Simple interest on loans is lowest for?

Declining balance loans

Sets procedures for promptly correcting billing mistakes, refusing to make credit card payments on defective goods, and promptly crediting payments

Fair Credit Billing Act (FCBA)

The total dollar amount paid to use credit

Finance Charge

A savings account offered by banks, savings and loan associations, and credit unions that requires a minimum balance and has earnings based on market interest rates

Money Market Account

What is the formula for simple interest?

I = Principal x Rate x Time

What dictates wether people spend or save?

Inflation

A periodic charge for the use of credit

Interest

The dollar amount, which may or may not be borrowed, that a lender makes available to a borrower

Line of Credit

The ability to purchase using a mobile device

Mobile Commerce

A credit union offers lower fees and higher interest on savings because?

They are nonprofit organizations with "profits" being distributed to the members