Personal Finance CH 6
Most grace periods are
A. 14−21 days. B. 7−10 days. C. 21−25 days. D. 30 days.
Most credit cards have a ________ grace period from the date of the bill to make payments.
A. 1− to 15−day B. 21 to 25−day C. 31− to 35−day D. 5− to 20−day
How long do you have to begin an investigation into a billing problem under the Fair Credit Billing Act?
A. 30 days B. 20 days C. 15 days D. 60 days
More than ________ of the 25 biggest credit card issuers do not charge annual fees.
A. 30 percent B. 50 percent C. 70 percent D. 90 percent
The lowest FICO a consumer can achieve is
A. 400. B. 300. C. 250. D. 505.
According to the Keown book, the national average FICO score is around
A. 650. B. 700. C. 759. D. 777.
The Truth In Lending Act requires that all consumer credit agreements disclose the ________ in bold print?
A. Annual Percentage Rate (APR) B. Effective Annual Rate (EAR) C. Nominal Interest Rate (NIR) D. Monthly Stated Rate (MSR)
Which of the following are important to convenience users of credit cards?
A. Card benefits and perks B. Low annual fee C. Interest−free grace period D. Only A and B E. All of the above
The ________ provides a single location for financial protection and oversight−and its mandate is to help consumers make better decisions.
A. Center For the People Bureau (CFPB) B. Consortium of Fiscal Protection Bureau (CFPB) C. Consumer Fiscal Protocol Bureau (CFPB) D. Consumer Financial Protection Bureau (CFPB)
Which of the following statements is most correct regarding a secured credit card?
A. Compared to non−secured credit cards, it always carries a much lower rate of interest. B. It is a valuable form of credit insurance — you are protected against loss if the card is lost or stolen. C. It provides a higher level of user security, using technology to prevent illegal use. D. It is useful to someone who has bad credit or no credit established yet.
Having completed a personal finance class, you are now ready to give some advice to your free−spending friends. Which one is unwise?
A. Control your spending through discipline. B. Quit using credit cards altogether. C. Look for trouble signs in credit card spending. D. Resolve any billing errors. E. Reduce the credit card balance.
________ occurs when someone, without your knowledge or consent, uses your name, address, Social Security number, bank or credit card account number, or other identifying information to commit fraud or other crimes.
A. Data breach B. Phishing C. Dumpster diving D. Identity theft
When you use a credit card at a store, the store is generally charged a fee ranging from 1.5% to 5%. What is this fee called?
A. Discount rate B. Merchant back−end charge C. Merchant discount fee D. Merchant rate
Sometimes retailers will give you up to a 5% discount if you pay cash for their products instead of using your credit card. Why?
A. Its much less paper work to process cash transactions. B. They are saving on the merchants discount fee so they pass the savings on to you. C. It is just good customer service, especially for repeat customers. D. They are getting close to their monthly charge limit and don't want to go over it.
Mary is 38 years old and many of her friends have gotten into trouble using their credit cards to buy things they can't afford. She feels lucky that her grandmother told her that credit is dangerous and that she should always pay cash for everything. So far, Mary has never had credit in her name and even paid cash for her car. From a personal finance perspective, what advice would you give to Mary?
A. Make sure that you keep a lot of money in liquid investments in case of an emergency. B. Nothing, it looks like we all could take advice from her! C. It's great that you don't owe any money, but you really need to establish credit in your name so you will have it if you need it in the future. D. You might want to talk with your insurance agent because having no credit history is probably causing you to pay higher rates for your insurance. E. Both C and D would be good advice for Mary.
Which of the following is the largest factor in determining credit?
A. New Credit B. Amount owed C. Payment history D. Types of credit used
Which of the following is the best strategy for controlling and managing your credit cards and open debt?
A. Protect against fraud. B. Resolve billing errors. C. Reduce your balance. D. Look for trouble signs in credit card spending. E. All are good strategies.
Jerome has three major credit cards and makes payments on them each month. He has had one of them for six years, another for three years, and the last for eleven months. Making just the minimum payment has become automatic at this point, and Jerome barely even looks at the statements. Jerome is beginning to think that his approach to credit may be faulty, and he wants to find out how to adjust it. He just applied for two additional credit cards. Based on his credit card usage, which of the following aspects of a credit card should be most important to Jerome?
A. The APR on the unpaid balance B. A low annual fee C. Perks and benefits, like frequent flier miles D. None of the above are important to Jerome.
Which of the following is a disadvantage of credit cards?
A. The finance charge that accrues on the account if not paid off in full each month B. Emergency use C. Allows for consumption before the purchase is fully paid for D. Allows for online shopping
Research has determined that undergraduate college students tend to behave in similar manners with regards to their credit card usage. As noted in Chapter 6, which of the following behaviors are indicative of undergraduate students' credit card behaviors?
A. Their parents do not frequently pay their credit card balances for them. B. They make more than the required minimum payment on 90% of all other cards each month. C. They pay off all of their cards in full each month. D. They make more than their minimum payment each month but still tend to carry a balance on their cards.
Jessica always thought the grace−period feature of her credit card was a wonderful idea because her charges were interest−free during the grace period. After taking Dr. Art Keown's personal finance course, she learned this startling truth about grace periods.
A. There are higher fees associated with grace periods. B. Grace periods are actually beneficial to the credit card company. C. Most banks eliminate their grace period on new purchases if you don't pay your balance in full. D. All credit cards carry a grace period.
Which of the following is an advantage of credit cards?
A. Using them means you will have less spendable money in the future. B. They allow the consumer the ability to rent cars and make online reservations. C. In general they are an expensive way to borrow money. D. They make it easy to lose control of spending.
Angela noticed a list of creditors at the bottom of her credit report. Some of the inquiries were voluntary and some were involuntary. What is the difference between the two?
A. Voluntary inquiries are due to your own credit requests; while involuntary inquiries are typically by creditors who seek to offer you a preapproved credit offer. B. Involuntary inquiries are due to your own credit requests; while voluntary inquiries are typically by creditors who seek to offer you a preapproved credit offer.
Consider the "Five Cs of Credit." The category that considers your current income level and current borrowing level is
A. capital. B. collateral. C. capacity. D. character. E. none of the above.
A Credit Bureau
A. contains information on your personal lifestyle. B. makes decisions about issuing credit. C. contains information regarding your financial situation and dealings. D. does not assign a score.
The process of mathematically evaluating your creditworthiness to obtain credit is called
A. credit evaluation. B. credit references. C. credit history. D. credit scoring. E. credit statistics.
If you are a credit user the most important factor in choosing a credit card should be
A. credit limit. B. annual fee. C. issuing bank's location. D. APR.
If you are a convenience user an important factor in choosing a credit card should be
A. issuing bank's location. B. credit limit. C. interest −free grace period. D. APR.
The choice of a credit card is a matter of personal credit card philosophy. If you are a credit user, the most important decision factor is the card's
A. late payment fee. B. annual fee. C. length of grace period. D. minimum payment. E. APR on the unpaid balance.
A low FICO score
A. may result in a credit card rate half the rate of that paid by those with a high FICO score. B. is the only factor the lender considers when determining whether to give you credit. C. is a good credit score. D. can cost you quite a bit when you get a mortgage loan.
Leon is 28 years old and pays cash for everything he buys. He has never had credit in his name and never missed or been late on any bills he has ever had. He recently went online to check what his credit score was. Where do you think his credit score would be?
A. over 800 B. between 700 and 799 C. between 600 and 699 D. None of the above
A(n) ________ card is a credit card that does not offer revolving credit and requires full payment of the balance at the end of each month.
A. premium B. T&E C. affinity D. single−purpose E. traditional charge account
Credit cards issued in conjunction with particular charities or organizations, like the Sierra Club or the Humane Society, that send a portion of their annual fee or percentage of their purchases back to the sponsoring organization are known as
A. premium cards. B. prestige cards. C. secured credit cards. D. affinity cards.
The ________ is the percentage of the credit card sale that the retailer owes to the credit card company.
A. retailer credit acceptance fee B. merchant's discount fee C. card usage allowance D. franchise fee
Credit cards are a form of ________ credit.
A. revolving B. service C. installment D. close ended
By law you have certain rights in connection with the credit bureau. They are
A. the right to view your personal credit report. B. the right to point out errors found in your file. C. the right to request the credit bureau to correct mistakes in your file. D. the right to file a statement presenting your view of a disputed issue. E. all of the above.
Your credit score affects
A. the size of your credit line. B. the rate you pay on your credit cards. C. the amount of junk mail offering additional credit cards that you receive. D. your mortgage rate. E. All of the above are correct answers.
One of the unpleasant secrets about using your credit card for a cash advance is that
A. there is usually a 6 to 8 percent upfront fee on the amount. B. the APR on the cash advance is typically lower than the APR for normal purchases. C. payments do not apply to cash advance balances unless the balance for regular credit purchases is zero. D. All but B apply to cash advances.
When you withdraw cash from an ATM using your credit card
A. you are not charged any interest until after the date the payment is due. B. you're using a relatively inexpensive way to borrow money. C. you begin paying interest immediately. D. the interest fee is lower than that for purchases.
Typically, the credit card issuer allows you a grace period, which means
A. you do not have to make a payment during the current month. B. you are not charged any interest during this grace period. C. you must pay your balance off in full to benefit from the grace period. D. interest charges are reduced during this time. E. both B and C apply.
Your credit card company cannot increase your rate for the first 12 months after you open an account unless
A. your card's introductory rate expires and your rate reverts to the "go−to" rate the company disclosed when you got the card. B. your card has a fixed interest rate tied to an index and the index goes down. C. you are more than 15 days late in paying your bill. D. all of the above.
The use of credit involves receiving cash, goods, or services with an obligation to pay later. Which statement is not an opening line to the use of credit in a shopper's language?
A. "Put it on my debit." B. "Put it on my account." C. "I'll pay for it with plastic." D. "Charge it."
Credit card insurance is usually unnecessary since your liability on credit card losses is limited by law to
A. $ 0. B. $50. C. $100. D. $500.
Assuming the APR on your credit card is 18% and your average daily balance this month was $10,000, what will your interest or finance charges for the month be?
A. $180 B. $150 C. $1.50 D. $60
Josh was sued by his former business partner. He lost the case and has to pay his former partner $10,000. He has not yet done so and is refusing to do so. Josh is applying for a mortgage for a new home. Should he be worried about the lawsuit impacting his mortgage application?
A. Absolutely, this kind of information is contained on one's credit report. B. No, this kind of information is not contained on one's credit report.
The main factor that determines the cost of a line of credit is the ________, which is also considered the true simple interest rate paid over the life of the loan.
Question content area bottom Part 1 A. annual merchant rate (AMR) B. teaser rate C. penalty rate D. annual percentage rate (APR)
Everyone who accessed your credit report within the last seven years appears in an "inquiry" list that appears on your credit report.
false
Credit card companies send out a whopping 6 billion credit card offers annually−roughly 60 offers per U.S. household!
true
Crystal tried to use her Macy's credit card at Target but was unsuccessful because her Macy's credit card is a single−purpose card and can only be used at Macy's.
true
Your credit card company is required to send you a notice 45 days before they can increase your interest rate, change certain fees (such as annual fees, cash−advance fees, and late fees), or make other significant changes to the terms of your card.
true
