Ch 7 Personal Finance
Property used as security for a loan
Collateral
The ability to borrow money and pay it back later
Credit
A fee charged for violating a credit agreement is called a rebate.
False
Easy access credit is usually a good deal for consumers; they should respond promptly to avoid hidden costs.
False
With a line of credit, there is no maximum amount that can be borrowed.
False
Credit used to finance a single high-priced item through a series of equal payments made over a set period of time
Installment Credit
A preapproved loan amount that a debtor can borrow against, pay back, and borrow again as needed
Line of Credit
A fee charged for violating a term of the credit agreement
Penalty
A refund of part of the purchase price of an item
Rebate
An account on which the account holder can charge repeatedly up to a maximum limit
Revolving Credit (think about it like revolving doors)
The maximum amount you are willing to pay for an item
Spending Limit
Which of the following types of credit requires that you pay the balance in full each month?
charge card
Which of the following types of credit usually has a fixed rate of interest for a set period of time?
consumer loan
A lender may require a borrower to provide collateral for a loan.
True
An extended warranty covers repair costs beyond the original warranty period.
True
Buying luxury items while basic needs are not being met is an example of financial irresponsibility
True
Credit card issuers can lower your credit limit at any time.
True
If you pay the full amount owed on your credit card each month, you can avoid paying interest on an outstanding balance.
True
Low introductory rates on credit cards often last 6 months to a year.
True
Many merchants encourage their customers to use store credit accounts.
True
The first step in creating a buying plan is defining your spending goal.
True
Using credit provides increased spending power.
True
When you are financially responsible, you are able to meet your own needs by carefully managing your resources.
True
When you report a dispute on your credit card statement, the credit card company must resolve it within a certain time period.
True
Without credit, many people would have to wait to buy things that could save them time and money.
True
Which of the following is a symptom of financial irresponsibility?
a. bills are not paid in a timely manner b. one's paycheck does not last the entire month c. there is inadequate food, clothing and shelter to live comfortably
When you receive your credit card statement, you should
a. compare charges listed with your sales receipts b. verify that payments made are shown on the statement c. verify that credits are shown for returned items
If you try to charge more than your limit on your credit card
a. the charge can be refused b. the charge may be approved, but you may have to pay an over-the-limit fee
On a credit card with a variable rate of interest,
a. the credit card company can change the rate without notice b. the interest rates tend to rise fast when interest rates in general are rising c. the interest rates typically go down very slowly
When interest for a credit card is calculated based on the amount owed after you have paid your bill each month, the _____ method is used.
adjusted balance
When interest for a credit card is calculated using the average daily balance method
an adjusted balance is computed for each day of the month
An organized method for making good buying decisions
Buying plan
A penalty for closing your account prior to a stated period
Cancellation Fee
A good buying plan begins with
evaluating your wants and needs
Credit for a set amount that is to be paid off in a set period of time is called
installment credit
Which of the following is an example of easy access credit?
instant credit offer
Which of the following online activities should be avoided?
online pop-up ads offering credit
The ability to receive services, such as care by a doctor, and pay for them later is called
service credit
Which of the following is the final step in creating a buying plan?
set a spending limit