Debit and Credit Quiz

An example of a financial institution is

A bank

List an advantage and disadvantage of a credit card.

A credit card provides a preapproved credit. It does not require immediate funds. It is a buy now, pay later payment type. Credit allows you to pay for things in emergencies that you otherwise could not afford. Credit cards are the best way to order something online or over the phone. If a service or item is not as expected, you can dispute the charge. Credit cards charge interest (at an annual percentage rate or APR) on unpaid balances. Cash advances and transfers usually have higher interest rates. Credit cards are not free money. Money charged to a credit card must be paid back plus interest if the bill is not paid in full.

Who uses financial institutions?

Almost everyone who maintains a savings or checking account, uses debit or credit cards, or needs a loan.

Banks want college students to have their credit cards. Why do you think this is? Is it a good idea? Explain your answer

College students use credit cards to buy the things they need and want. Banks want college students to become lifelong customers. College students may one day need additional bank services for car and home loans. Banks make money when students buy things on a credit card and don't pay the balance in full each month.

True or False: A bank is a not-for-profit financial institution.

False

True or False: Internet banking means using a bank branch to make deposits and withdrawals.

False

True or False: The lower an applicant's credit score, the lower the risk to the lender.

False

When lenders lend money to borrowers, they charge an additional fee for the use of their money. This fee is called

Interest

To keep your account safe, create a strong password when banking online. Name two additional safety tips when banking online.

Keep my user name and password private: don't store my account number or PIN on my mobile device; log off my account and close the browser window when finished.

Define online banking

Online banking is an electronic way to view account activity and pay bills via the Internet and an institution's website.

True or False: A credit card provides preapproved credit.

True

True or False: Identity theft is a threat to anyone with a good credit rating.

True

True or False: You order your favorite foot-long sandwich with chips and a drink using your debit card. The total comes to $5.68. Your online statement shows a charge of $40.68. The extra amount is an overdraft fee.

True

Identify the incorrect statement: a. A debit card allows for an immediate electronic transfer of money from a cardholder's savings or checking account. b. A debit card is essentially a paper check but doesn't require the processing time a check does. c. A debit card is handy in an emergency when you don't have the money to spend. d. A debit card is a pay-now payment type with no grace period for payments.

c. A debit card is handy in an emergency when you don't have the money to spend.

Lenders use credit agencies to determine

d. All of the above: An applicant's credit score, an applicant's credit history, whether an applicant has any outstanding debt or defaults