CSCFFS 2260: Credit Cards and Consumer Loans
Justin had a beginning balance of $100 on his credit card as of May 1 last month. On May 11 he charged a meal for $44. On May 21 he made a payment of $48. What was his average daily balance for the month?
$113
Zelda was approved for a $3,000, two-year, 11 percent loan with the finance charges figured using the discount method. How much cash will Zelda receive from this loan?
$2,340
The total cost of credit on a yearly basis stated as a percentage rate is its
APR
Miako has just applied for a credit card that offers a 1.9 percent interest rate for 12 months. At the end of 12 months, the interest rate will be "prime plus 9 percent." Which of the following characteristics does this card have?
Both variable interest rates and teaser rates
Which of the following pieces of information does not have to be disclosed in credit card ads and applications?
Credit limit
Interest assessed during each payment period (usually each month) based on the current outstanding balance of the installment loan is referred to as which method of calculating interest?
Declining-balance
By making the minimum payment on a typical credit card, a borrower will have the debt paid off in about two years.
False
Credit card bills only need to inform consumers of the method used to compute the finance charges.
False
Obtaining money via a credit card cash advance is a low-cost alternative if you need a loan.
False
A borrower who has failed to make a payment of principal or interest when due or meet any other requirement of a credit agreement is said to be in foreclosure.
False
A personal line of credit is a form of closed-end credit.
False
Affinity cards are prestige bank cards with the logo of a sponsoring organization imprinted on the face of the card.
False
Chargebacks are the same as cash discounts.
False
Consumer credit is non-business debt used by consumers for expenditures including home mortgages.
False
Installment credit is also called open-ended credit.
False
Making the minimum payment on a credit card that you continue to use will bring your balance down over time.
False
Repossession clauses protect the borrower's interest.
False
When a person makes a purchase on credit with no cash passing between the borrower and the lender, this is called a cash loan.
False
With a conditional sales contract, the title passes to the buyer when the document is signed.
False
Which of the following should not be done when you find an error on your credit card statement?
Send all original documentation to the credit card issuer.
A retail credit card allows a customer to make purchases on credit at any of the outlets of a particular retailer or retail chain.
True
Credit card issuers sometimes send convenience checks to customers in an effort to entice them to take out a costly cash advance.
True
Credit limit is the is the maximum outstanding debt that a lender will allow on an open ended credit account.
True
Service credit is granted to consumers by public utilities, physicians, dentists, and other service providers that do not require full payment when services are rendered.
True
The cost of credit on a yearly basis as a percentage rate is called the APR.
True
The declining-balance method of calculating interest results in amortization of the amount owed.
True
A fixed interest rate means that the rate will not change over the life of the loan.
True
Affinity cards are a source of revenue for the sponsoring organization.
True
All types of open-ended credit accounts allow multiple uses without reapplication, but some require that the entire balance be repaid each month.
True
As a gesture of goodwill, most companies waive the $50 fee for unauthorized use of credit cards when notified promptly of the unauthorized use.
True
During the period that a billing dispute is being investigated, creditors cannot send dunning letters.
True
If you notify the card issuer within two days of a loss or theft, you are not legally responsible for any fraudulent usage of the card.
True
Making a payment on one credit card with a cash advance from another is called a balance transfer.
True
On declining-balance installment loans, the APR is the same as interest rate applied if there are no fees charged on the loan.
True
The Fair Credit Billing Act permits chargebacks when there is a goods and service dispute over a purchase made with a credit card that cannot be resolved with the merchant.
True
The Truth in Lending Act limits a cardholder's credit card liability for lost or stolen credit cards.
True
The amount owed on a debt is the principal.
True
The billing date is the last day of the month for which any transactions are reported on the statement.
True
With declining-balance loans, there are no prepayment penalties.
True
You might find yourself obligated to pay an entire debt in full if you miss several payments because of the ____ clause found in most installment loan contracts.
acceleration
Charge accounts are referred to as open-ended credit because they
allow repeated borrowing without having to reapply for the credit each time.
A cash advance can be obtained by using
bank credit card accounts.
Before applying for a preapproved credit card, you have already
been granted credit.
Noninstallment credit includes
both single-payment loans and open-ended credit.
The legal right to seize and dispose of property to obtain payment of an unpaid claim is called a(n)
lien.
Single-payment, open-ended, and service credit are lumped together under the category of
noninstallment credit.
When the declining-balance method is used to calculate interest on an installment loan, the periodic interest rate is applied to the
outstanding balance each period.
The outstanding balance owed on a debt is the
principal.
The contract supporting an installment loan is called a(n)
promissory note.
Credit cards issued by local and national merchants and other major non-bank companies are examples of
retail credit accounts.
An installment purchase agreement provides a measure of protection for
the borrower.
Most credit cards have a grace period only if
you paid the balance in full the previous month.
If no payment is received by the due date on a credit account,
a credit bureau may be notified of slow payment. the company may begin collection efforts. the cardholder may be declared in default.
The time period between billing dates on your credit cards is the
billing cycle.
A method not recommended for getting out of excessive credit card debt is to
pay the minimum amount due on your high interest-rate cards, and pay as much as possible on the lowest interest-rate cards.
