FIN210 Chapter 7 SmartBook

Consumer finance companies do not offer:

credit card loans

Select all that apply Which of the following is generally considered to be expensive sources of loans? - bank credit cards - credit unions - department stores -appliance companies - finance companies

- bank credit cards - department stores - appliance companies - finance companies

True or false: Most credit cards allow a grace period on cash advances.

False

True or false: Credit cards are convenient, but not always better, to use than installment debt because of the latter's application process and procedures; but that ease of use can lead to overuse.

True

True or false: Loans from finance companies and appliance stores tend to be the highest cost loans.

True

The Fair Debt Collection Practices Act ______ to creditors that collect debts themselves.

does not apply

Tax refund loans are a(n) ______ way to borrow money in case of a cash shortfall.

expensive

Most credit cards carry a special [_____], based on the percentage of the amount borrowed, that is applied when a cash advance is taken out. This is a one-word answer.

fee, charge, or rate

Two situations when you should avoid credit are: when you don't [_____] or really want the purchase, and when you could pay cash but choose to finance the needed item. (Enter one word per blank.)

need or require

The two major categories or types of credit are [_____] -end and closed-end credit.

open or opened

A credit counseling organization usually provides credit management classes and helps you devise a credit management [_____]. (Enter only one word per blank.)

plan, arrangement, scheme, strategy, or system

Once you decide that you need to use credit to meet your needs, and assuming that you can afford the payments, you must [_____] for the credit.

qualify, apply, or shop

Most automobile financing agreements permit your creditor to [_____] your car anytime you are in default on your payments.

repossess, repo, take, reposess, or reposses

Which of the following best explains why credit cards are more dangerous than installment loans?

A credit card is easier to use than taking out an installment loan.

True or false: Family loans are simple arrangements and can benefit both parties and no documentation is recommended.

False

What is the best strategy if you can't make a payment on a debt?

Notify the creditor as soon as possible in an attempt to work out a modified payment plan.

Cash advances are obtained through your [_____] card at a bank or through an ATM machine. This is a one-word answer and found in the discussion of cash advances.

credit

Cash advances require that you pay a transaction [_____]

fee or charge

Cash advances on credit cards usually accrue [_____] from the moment you accept the cash.

interest

If you are denied credit by a bank or credit union, you should question:

your ability to afford the higher rate charged by a loan company.

Payday loans are (inexpensive or expensive) [_____] although readily available via check cashers, finance companies, and other sources.

expensive

A married couple that does not talk about money could be:

having debt problems.

The interest rate on cash advances is often [_____] than the rate on purchases. This is a one-word answer.

higher, greater, bigger, larger, or more

Family members may only charge interest they would have earned on the money if they had deposited it in a ______ account.

passbook

There are several reasons that you should borrow from a credit union, including their patience in dealing with borrowers who have good reasons for missed payments, and they provide [_____] service.

personal, personalized, quality, great, good, customer, caring, or customized

Select all that apply The two main activities of the CCCS are: - helping families with debt problems by helping them manage debts. - giving grants to families with heavy debt burdens. - teaching families how to avoid heavy debt burdens in the future. - lending money to families with heavy debt burdens.

- helping families with debt problems by helping them manage debts. - teaching families how to avoid heavy debt burdens in the future.

Select all that apply Which of the following are advantages of borrowing from a credit union? - patient with borrowers - interest free loans - personalized service - can get a loan without being a member

- patient with borrowers - personalized service

Select all that apply Which of the following types of loans are offered by consumer finance companies? - share draft loans - personal installment loans - second mortgages - passbook loans

- personal installment loans - second mortgages

If you have funds available on your credit card, you can obtain a cash advance from ______.

- a bank or credit union - an ATM

Select all that apply The pros and cons of T&E credit cards, such as American Express, include: - partial payment of the balance is due each month. - annual fees are typically high. - annual fees are typically low. - full payment is due each month. - no finance charge is incurred as full - payment of the balance owed is due each month. - a monthly finance charge is due regardless of the balance.

- annual fees are typically high. - full payment is due each month. - no finance charge is incurred as full payment of the balance owed is due each month.

One reason some people use payday loans is that:

They are convenient

True or false: You should avoid credit when you don't need the purchase and when you can afford to pay cash to acquire the item.

True

Which of the following best explains the flaw in the strategy of borrowing from a finance company? - Even though finance company rates are lower, you will pay a much higher application fee, which you probably can't afford. - When you are denied credit from traditional sources, you probably have less ability to afford the higher rate a finance company charges.

When you are denied credit from traditional sources, you probably have less ability to afford the higher rate a finance company charges.

The two major categories or types of credit are [_____]-end and open-end credit

close or closed

Passbook loans are offered by

commercial banks

True or false: Only about one million Americans belong to credit unions.

False

True or false: The two types of credit are closed-end and free credit.

False

Which of the following statements is not true? - Micro lending organizations generally offer reasonable interest rates. - Finance companies offer inexpensive loans. - Cash advances can be very expensive. - Credit unions may be more willing to be patient with borrowers than other lending institutions.

Finance companies offer inexpensive loans.

Select all that apply Which of the following loans are offered by credit unions to consumers? - Credit card loans - Passbook loans - Installment loans - Share draft loans

- Credit card loans - Installment loans - Share draft loans

An example of a travel and entertainment card is ______.

Diners Club

Which of the following statements is true? - Cash advances on credit cards are inexpensive. - You must qualify to be a member in order to get a loan at a credit union. - Loans from family members are always inexpensive and have no drawbacks. - Credit unions usually charge very high interest rates on loans.

You must qualify to be a member in order to get a loan at a credit union.

The interest rate on cash [_____] is often higher than the rate on purchases.

advances, advance, loan, loans, or borrowing

Before you borrow money you should ask yourself if you need a loan, if you can [_____] the loan, and if you can qualify for a loan.

afford, repay, or pay

Another very expensive way to borrow is a(n) [_____] refund loan, which is possibly more expensive than a cash advance on a credit card. This is a one word answer.

tax

Credit offered by car dealers, such as financing through ______, may be less expensive than banks, but the downside is that the car dealer may be less willing to discount the price.

the General Motors Acceptance Corporation or Ford Motor Credit Corporation

True or false: Most automobile financing agreements allow the lender to repossess your vehicle when you are in default on your payments.

True

True or false: The Fair Debt Collection Practices Act prohibits certain practices by agencies that collect debts for creditors.

True

Select all that apply Which of the following loans are available to consumers through commercial banks? - loans on the cash surrender value of - - life insurance - second mortgages - passbook loans - credit cards

- second mortgages - passbook loans - credit cards

If you cannot make a payment on a debt when due, contact the [_____] at once to work out a modified payment plan. This is a one-word answer.

creditor, lender, bank or financier

Select all that apply It is said that the least expensive way to borrow is when you borrow on the value of a financial asset. Which of the following loans would meet that test? - certificate of deposit loan - a credit card cash advance - life insurance cash surrender value loan - a home equity loan

- certificate of deposit loan - life insurance cash surrender value loan

True or false: Most credit card companies do not charge a fee when a cash advance is made.

False

Select all that apply Which of the following are signs of possible debt problems? - borrowing money to pay old debts - getting a credit card revoked - using up savings - decreasing the total balance due on credit cards every month - having little in savings

- borrowing money to pay old debts - getting a credit card revoked - using up savings - having little in savings

Credit offered by car dealers is generally ______ expensive than most other car loans.

less