FIN 320 - Chapter 6

What are the factors that a creditor cannot use to deny a person credit? A. Marital status B. Income C. Credit rating D. Race E. Age F. Color

- Age - Color - Race - Marital status

Select all of the following ways that represent the improper use of credit. A. Benefits of buying now greater than costs of using credit B. Using credit to have and enjoy more in life now C. Default and loss of credit rating D. Bankruptcy

- Bankruptcy - Default and loss of credit rating

What are responsible purchases with a home equity loan? A. New car for spouse B. Educational expenses C. Home improvements D. Family vacation E. Jewelry for a Christmas party

- Educational expenses - Home improvements

Rank the following items in the order they should be completed to dispute a billing error.

1. Write a letter of complaint 2. Purchase placed in dispute 3. Receive an acknowledgment from the credit company 4. Purchase removed or credit issued to account

The maximum debt payment-to-income ratio that is acceptable is around ________________ %. this is found in the discussion of debt-payments-to-income ratio.

20%

What is a credit bureau? A. A reporting agency that collects information to provide to future employers only B. A reporting agency that tells consumers the exact method to increase their credit score C. A reporting agency that collects information on how promptly people and businesses pay their bills D. A reporting agency that tracks your dining preferences

A reporting agency that collects information on how promptly people and businesses pay their bills

Which of the following is not a valid reason for using credit? A. Buying a car to travel to work B. College education C. Borrowing for every day expenses D. Medical emergency

Borrowing for every day expenses

True or false: Credit cards are not particularly common among consumers.

False

True or false: If you find a problem in your bill, you should notify the credit bureau in writing within 60 days.

False

True or false: The Fair Credit Reporting Act was enacted in 1960.

False

What does the Fair Credit Billing Act (FCBA) do? A. It protects consumers with billing mistakes and provides assistance in avoiding payment for defective merchandise. B. It allows consumers options to design the terms of their loans and decide their own payback option. C. It protects consumers from discrimination when applying for a loan. D. It allows consumers access to credit card company files and tax documents. E. It corrects mistakes and returns defective goods on behalf of consumer.

It protects consumers with billing mistakes and provides assistance in avoiding payment for defective merchandise.

What type of credit is a home equity loan? A. Interest B. Credit card limits C. Open-end credit D. Closed-end credit

Open-end credit

How can a consumer get a credit card if they have bad credit? A. The consumer can write a letter to the bank explaining their circumstances. B. The consumer can easily purchase a prepaid credit card and keep adding money to it. C. The consumer may be able to get a secured credit card from a savings institution. D. The consumer cannot get a credit card or a bank card.

The consumer may be able to get a secured credit card from a savings institution.

The grace period is the time allowed to pay the balance on a credit card before interest accrues. True False

True

True or false: Credit is defined as an arrangement to receive cash, goods or services now with payment in the future.

True

A home equity loan can be seen as: A. borrowing money against the value of your house B. taking a loan out against the value of your mortgage C. borrowing money from future income

borrowing money against the value of your house

A borrower's assets in excess of liabilities is called: A. collateral B. the personal financial statement obligations C. capital D. the amount of money the borrower owns

capital

A smart card is also known as: A. travel and entertainment card B. debit card C. credit card D. chip card

chip card

The law that protects consumers by setting standards for correcting billing mistakes and allowing customers to avoid paying for defective merchandise is called the ______. A. personal Credit Requirement Act B. fair Credit Buying Act C. personal Credit Buying Act D. fair Credit Billing Act

fair Credit Billing Act

Credit allows you to buy clothes today and pay for them in the __________________.

future

Closed-end credit is paying back a loan: A. over an unspecified amount of time B. in a specified period of time and in payments of specified amounts C. over several payments with a partial payment agreement

in a specified period of time and in payments of specified amounts

A loan from the bank for personal use is considered _______________ cash credit.

installment

A periodic charge for the use of credit is known as _______________.

interest

When reviewing applications for credit: A. lenders use the five Cs as a way of determining who should reapply for credit B. lenders use the five Cs as a way of determining who is worthy of the credit C. lenders use the five Cs as a way of creating diversity in offering loans

lenders use the five Cs as a way of determining who is worthy of the credit

To calculate the debt payments to income ratio, total monthly debt payments (excluding home mortgage) is divided by the ______________ monthly income of the consumer. This is one word answer.

net

When making online purchases, you should: A. use a secure browser, keep a record of the purchase, and review your statement B. review your online purchasing method and review the Web site's policy C. use a secure browser and keep a record of the transaction D. use a favorite Web site, get the best price, and do an online antifraud survey

use a secure browser, keep a record of the purchase, and review your statement

Which of the following is something that the Equal Credit Opportunity Act designed to do? A. Show bankers how to ignore retirement income when evaluating loans B. Ensure that persons are not discriminated against because of their sex C. Offer credit to consumers through the ECOA bank D. Ensure that persons are not discriminated against because of their race E. Ensure that persons are not discriminated against based upon their age

- Ensure that persons are not discriminated against because of their sex - Ensure that persons are not discriminated against because of their race - Ensure that persons are not discriminated against based upon their age

What are the three types of closed-end credit? A. Single time series credit B. Installment sales credit C. Installment series credit D. Installment cash credit E. Single lump-sum credit

- Installment sales credit - Installment cash credit - Single lump-sum credit

Which of the following should you consider when determining whether you can afford a loan? A. Your monthly pay B. Your monthly expenses C. How badly you want the item D. funds remaining for other expenses

- Your monthly pay - Your monthly expenses - funds remaining for other expenses

Security features currently being added to credit cards to deter counterfeiting include: A. ultraviolet ink on the company logo B. eye scan devices to prove identity C. thumbprint recognition for point-of-sale terminals D. a holograph that changes color and image

- a holograph that changes color and image - ultraviolet ink on the company logo

A prearranged amount of money that is accessed with special checks is called: A. a revolving check credit B. a check access account C. a revolution of credit D. a bank line of credit

- a revolving check credit - a bank line of credit

To improve your credit score, it is important to: A. avoid applying for new credit cards B. increase the amount of credit outstanding C. pay your bills on time D. understand the computation of outstanding debt

- avoid applying for new credit cards - pay your bills on time - understand the computation of outstanding debt

What are techniques for managing your credit history? A. Don't use credit cards for travel. B. Look for errors and report them immediately. C. Always shop at the same stores. D. Review monthly bank and credit card statements. E. Check your credit report annually.

- look for errors and report them immediately - review monthly bank and credit card statements - check your credit report annually

Examples of protecting against fraud are: A. always giving your name, address, account, and Social Security number when making a purchase B. writing your account numbers on the outside of letters C. not giving your card number over the phone unless you have initiated the call D. be sure your credit card is returned to you after a purchase

- not giving your card number over the phone unless you have initiated the call - be sure your credit card is returned to you after a purchase

Closed-end loans are _____________ loans repaid within a(n) ______________ time frame with equal payments.

- one-time - specific

What is a typical grace period for retailers? A. 21-30 days B. 15 days C. 15 business days from the time sent D. Up to 12 days

21-30 days

How does the Fair Credit Billing Act protect consumer credit ratings? A. By allowing consumers to decrease the total debt of their credit and keep the merchandise B. By allowing the consumer to create and establish their own credit score so they do not have to pay as much interest C. By allowing consumers to challenge charges that are false and avoid having delinquent charges added to their credit history

By allowing consumers to challenge charges that are false and avoid having delinquent charges added to their credit history

Which of the following is the best description of the importance of consumer credit in the U.S.? A. Consumer credit is insignificant in the U.S. economy. B. Consumer credit is a part of the U.S. economy, but is not a major force. C. Consumer credit is a major force in the U.S. economy. D. Consumer credit is relatively unimportant in the U.S. economy.

Consumer credit is a major force in the U.S. economy.

Which of the following is the main advantage of credit? A. Credit allows people to purchase items, but not if funds are low. B. Credit allows you to enjoy goods and services now and pay later C. Credit allows consumers not to worry about their purchases. D. Credit allows goods and services to be purchased and paid for now.

Credit allows you to enjoy goods and services now and pay later

A home equity loan is never set up as a revolving line of credit where borrowings are allowed up to a specified limit and for a stated time period. True False

False

Which of the following situations will credit provide an opportunity for a more efficient and productive life? A. Loan for elective cosmetic surgery B. Loan for vacation upon completion of college C. Loan for business operations D. Loan for new Ferrari

Loan for business operations

Which of the following is NOT true? A. Cardholders who pay in full each month are convenience users B. Cardholders who do not pay in full each month are borrowers C. Most credit card companies do not offer a grace period

Most credit card companies do not offer a grace period

Purchasing gas, food, school books, and coffee on your Visa card are examples of what kind of credit? A. Line of credit B. Revolving check credit C. Open-end credit D. Closed-end credit

Open-end credit

What is the difference between convenience users and borrowers? A. The credit limit amount of the consumer versus the balance amount B. The amount of credit used by a consumer versus a business C. Payment amounts that are more than $1,000.00 D. Payment of the full balance versus carrying over a balance E. The interest rate charged to the consumer versus a business

Payment of the full balance versus carrying over a balance

Who can a victim of identity theft call to network with other victims? A. The bank B. The Secret Service C. The Privacy Rights Clearinghouse D. The identity theft hotline E. The credit reporting agencies

The Privacy Rights Clearinghouse

How does the Secret Service fight identity theft? A. The Secret Service typically focuses on financial fraud cases with large amounts of money involved. B. The Secret Service tries to catch the thief in the crime by posing as specific persons who lose their identity. C. The Secret Service provides a hotline for all identity theft victims. D. The Secret Service uses intelligence to locate thieves in other countries.

The Secret Service typically focuses on financial fraud cases with large amounts of money involved.

If you purchase a new but defective item that the business will not accept as a return, what does the FCBA require? A. The credit card company is not required to handle these issues. B. The credit card company must refund your item and call the seller to check on the process that manufactured the defective part. C. The credit card company will work with you and the business to fix the item. D. The credit card company will allow you to withhold payment on such item because it is defective.

The credit card company will allow you to withhold payment on such item because it is defective.

Why is paying only the minimum payment detrimental? A. It is not detrimental. B. The longer it takes for you to pay off a balance, the more finance charges you pay on an item. C. It is applied to the balance only and not the interest that is accrued.

The longer it takes for you to pay off a balance, the more finance charges you pay on an item.

Which of the following is a disadvantage of paying the minimum payments on credit cards? A. The payment of the minimum maintains your credit score but is costly. B. The payment pays for interest and very little of the balance due. C. The minimum payment decreases your credit limit.

The payment pays for interest and very little of the balance due.

What are the advantages to overspending with credit? A. Having resources to help friends B. Financial habits that last for a long time C. Less and less money to pay off debt D. Losing sight of financial goals E. There are no real advantages to overspending on credit

There are no real advantages to overspending on credit

Why are the five Cs used? A. To help identify ways to reduce fees for existing customers B. To help identify good customers for credit approval C. To help identify customers who can be charged more

To help identify good customers for credit approval

A credit bureau is a reporting agency that collects credit and other information about consumers. True False

True

The ECOA covers your mortgage application and bans discrimination based on race, color, age, sex, marital status, national origin, and several other factors. True False

True

True or false: A reliable way to see if you can afford a loan is to determine what you will give up to make the monthly loan payment.

True

True or false: People who have a strong willingness and ability to repay debts generally have the highest credit ratings.

True

True or false: The base computation for a home equity loan is the current market value of the home less the amount you still owe on your mortgage.

True

What is the proper way to correct a billing error? A. Call the credit reporting agency to fix error. B. Contact FCBA to fix the billing error. C. Write a clear letter reporting the error to the credit agency. D. Call the Better Business Bureau.

Write a clear letter reporting the error to the credit agency.

Which of the following is part of the billing dispute process? A. Writing a letter to the creditor B. Calling the credit company and yelling at them C. Writing a letter to the retailer to discuss return options D. Calling your friend who made the purchases to discuss repayment options

Writing a letter to the creditor

Can credit cards be issued to consumers who have been irresponsible with credit? A. No, irresponsible credit card users cannot use credit cards. B. Yes, the bank will extend a credit limit up to the balance of a connected savings account. C. Yes, the bank extends the credit limit to an extra month's pay.

Yes, the bank will extend a credit limit up to the balance of a connected savings account.

A bank line of credit is also known as: A. a debit card B. a cashier's check C. an open-end credit D. a revolving check credit

a revolving check credit

An arrangement whereby borrowings are permitted up to a specified limit and for a stated period is known as: A. a revolving line of credit B. credit card limits C. open-end credit D. closed-end credit

a revolving line of credit

Capacity is the borrower's financial __________ to meet the credit obligations.

ability

Typically, qualified cosigners: A. have many addresses B. have a poor credit history C. are able to pay loan payments D. will not pay the loan payments

are able to pay loan payments

When cosigners sign their loans, they: A. are stating that they are able to pay for the loan if required B. are stating that they will pay the loan only after being sued C. are unable to pay the loan if needed, but will do everything they can to pay

are stating that they are able to pay for the loan if required

When evaluating the 5 Cs of credit, ______ is determined by a borrower's assets or net worth. A. collateral B. capital C. conditions D. capacity

capital

A loan for a motorcycle is an example of: A. open-end credit B. closed-end credit C. vehicle credit

closed-end credit

Economists now recognize ______________ _______________ as a major force in the U.S. economy.

consumer credit

_______________ users of credit typically pay off their balances each month.

convenience

Consumers that pay off the balance each month are called: A. convenience users B. monthly users C. borrowers D. compulsive shoppers

convenience users

Which of the statements is true? A. credit used by a business is called consumer credit B. consumer credit refers to the use of credit for buying a house C. credit involves paying now for future satisfaction D. credit is an arrangement to receive cash or goods or service now and pay for them later

credit is an arrangement to receive cash or goods or service now and pay for them later

The Fair Credit Billing Act provides that you may withhold payment on damaged or defective goods or poor services you have purchased with a credit card as long as you have A. written letters to the merchant complaining about the product. B. given the merchant a bad Yelp review. C. called the credit reporting agencies to report the problem. D. made a sincere attempt to resolve the problem with the merchant.

made a sincere attempt to resolve the problem with the merchant.

You should review your credit file at a specific credit reporting agency at least ____________ time(s) per year.

one

The Fair Credit Reporting Act of 1971: A. does not allow affected consumers to sue consumer reporting agencies that negligently fail to comply with the act B. regulates the use of credit reports, requires deletion of obsolete information, allows access of their files to consumers C. does not allow credit reports to be provided to someone who will use it in the underwriting of insurance D. allows bankruptcy information to be reported up to seven years

regulates the use of credit reports, requires deletion of obsolete information, allows access of their files to consumers

If you have a complaint about a business while dealing with identity theft issues, you can file a complaint with: A. the Privacy Rights Clearinghouse B. the Federal Trade Commission C. the Social Security Administration D. the Secret Service

the Federal Trade Commission

When referring to credit, character means: A. the borrower's attitude toward credit obligations B. the borrower's attitude toward the bank or lending firm C. the bank's willingness to lend credit to this individual

the borrower's attitude toward credit obligations

Character, capacity, capital, collateral, and conditions are known as: A. the Cs B. the five Cs of credit C. the conditions that are needed to work in credit management D. the creditor's bible

the five Cs of credit

The difference between a smart cart and a regular credit card is: A. the IQ of the cardholder B. there is no difference C. the magnetic strip embedded on the side of the smart card D. the metallic chip embedded on the front of the smart card

the metallic chip embedded on the front of the smart card

The most important thing you can do to improve your credit score is to pay your bills on ________________. This is a one word answer.

time

A method to confirm that you can pay for the loan is: A. to have enough take home pay to cover monthly expenses, the loan payment and other expenses B. your take home just covers monthly expenses and the loan payment C. take-home pay does not cover monthly expenses

to have enough take home pay to cover monthly expenses, the loan payment and other expenses

The Fair Credit Billing Act's underlining purpose is: A. to protect consumer credit ratings B. to get the lowest possible interest rate for its clients C. to collect the outstanding debt consumers owe creditors D. to protect the credit agencies from consumer complaints

to protect consumer credit ratings