HSA/CP 2nd semester exam SG questions

Choosing the right savings involves just three steps.

1. Determine how much access you want to your money. This is called liquidity. 2. Determine how much money you have to deposit. 3. Find the best interest rate.

The rule of 72

72 divided by "interest rate" = number of years needed to double your money

Gift cards

A gift card is pre-loaded with an amount of funds. Once those funds are spent, the card is no longer valid and cannot be reloaded. Many stores and online retailers offer branded gift cards that are good only at their stores. Many financial institutions offer prepaid gift cards that are accepted wherever debit cards are accepted.

This is a fee that some, but not all, credit card issuers charge to use their credit card

Annual fee

Also known as interest rate, it is the percentage used to compute the finance charges on an outstanding balance

Annual percentage rate (APR)

The amount of unused credit available on your credit card account

Available credit

how much debt you can manage, based upon your income

Capacity

the assets you own, including real estate, savings and investments

Capital

This document details the terms and conditions of your credit card account. It will include your APR, any applicable annual fee, penalties and other costs associated with the use of the card

Cardholder agreement

how well you handle financial obligations

Character

_____ interest is what makes savings really grow.

Compound

The maximum amount you are allowed to carry as a balance on the card

Credit line (or credit limit)

Based on the interest rate, this is the amount of interest you pay on the outstanding balance

Finance charge

Types of Prepaid Cards:

Gift cards Reloadable

Protecting your personal information and accounts

Identity theft occurs when someone steals your personal information and uses it to get loans, credit cards, cell phone or utility services or to open other accounts in your name. Identity thieves often rack up debt in your name, which has devastating effects on your credit history, and can cause you the loss of countless hours correcting the situation.

_______ is money the bank pays you for leaving it in your savings account.

Interest

Amount charged if your payment is received after the billing due date

Late payment fee

The amount due based on the percentage of the outstanding balance, or a minimum fixed amount

Minimum monthly payment

When you write a check or make a withdrawal from your checking account that leaves you with a balance below zero. If you sign up for overdraft protection, your bank will cover the transaction but will likely charge you an overdraft fee to do so

Overdraft

How to increase your creditworthiness:

Pay down your debts. Pay off your credit card balances in full every month. If you find yourself unable to do so, pay down your debt as soon as possible. Creditors look at the gap between your balance and your credit limit. The more unused credit you have, the better your creditworthiness. Used wisely, credit cards help your creditworthiness. Spend less than you earn. Keep old accounts open. Credit card issuers and lenders often look at the length of your credit history. Keeping old credit card accounts open with a zero balance helps your credit history in two ways. First, it maintains the length of your credit history. Second, when you close an account, you lower the total amount of credit available to you, which in turn raises the ratio of balances on your other loans and credit cards. Pay your bills on time. Avoid bankruptcy. Bankruptcy is a legal state granted by a court of law that declares you unable or impaired in your ability to pay back your debts to your creditors. Bankruptcy is a last resort. Most bankruptcies can be avoided. Bankruptcies stay on your credit history for a very long time.

Credit/Debit/Prepaid cards

Pay now: Debit Cards Pay Later: Credit Cards Pay in Advance: Prepaid Cards

Reloadable

Reloadable prepaid cards work exactly like prepaid mobile phones, where you use minutes and then refill them. With a reloadable prepaid card, you (or your parents) load the card with an initial amount of money. You use the card wherever debit cards are accepted. When the balance gets low, you can refill the card on the phone or online and continue to use it.

Ways to save

The first rule of saving: Pay yourself first. In other words, instead of buying things and then seeing if there's any money left over to save, put aside money BEFORE you use it up. Otherwise, you may never get around to saving.

Types of savings

They are a traditional savings account, a checking account and a Certificate of Deposit, also called a CD.

Finding the balance:

To determine how balanced your budget is, you simply need to add up all your income and subtract all your expenses. The figure you arrive at is your net gain or loss. If the net amount is positive, this is a good sign — it means you are living within your income level. It also means you can put EVEN MORE money into savings. If the net amount is negative, however, that means your monthly expenses exceed your monthly income;in other words, you're operating at a loss. You will need to find ways to trim the expense side of your budget or increase your income (or both); otherwise you'll accumulate more and more debt.

______ are goods and services that are not essential to daily living, but they are often things that make people happy or may make life seem a little easier or a little more special.

Wants

Creditworthy: Establishing, maintaining and protecting credit.

When lenders consider your loan or credit card request, their main concern is: Can and will you pay back the amount you borrow responsibly and on time? In other words, are you creditworthy? They use many tools and consider many factors to arrive at their decision. The Three "Cs" of credit are used to determine your creditworthiness. Should a lender approve your car loan or student loan? Should a service provider approve your cell phone contract? Should a landlord sign a lease with you? Are you a good job candidate?

A ______ is a financial plan that takes a person's income (the money they earn) and determines where all of that money is spent. It's an effective way to see if you are spending too much on certain items, or if you could be saving more money than you currently are.

budget

A _______ is when you add money to your account.

deposit

When you spend money on something you want versus something you need, this is called _____ _____.

discretionary spending Examples of discretionary spending: a soda and snack at a fast food restaurant , movie tickets, a summer vacation.

The ______ ______ is the percentage amount of your principal that the bank agrees to pay into your account. An interest rate is often referred to as an ______, or ______ _____ ______.

interest rate; APR or Annual Percentage Rate

Your ______ are all of the monthly expenses associated with the goods and services that keep your life stable.

needs

In a savings account, _______ refers to the amount of money you deposit in your account to begin saving.

principal

How simple interest is calculated

principal x interest rate x time = interest earned Example: You open a savings account with $1,000 at a 5% simple APR. What will you earn in interest in the first year? $1,000 x .05 x 1 = $50 interest earned every year

Examples of fixed expenses:

rent, car payment, monthly bus or train pass

Examples of variable expenses:

utility bill, groceries, gasoline, phone bill

Your expenses can be divided into two types: fixed expenses, which are the same amount every month, and _____ _____, which often fluctuate throughout the year.

variable expenses

A _______ is when you take money out of your account.

withdrawal

Ways to prevent identity theft:

• Always keep track of your credit cards and credit card numbers. Carry a minimal number of cards with you and store the rest, and your bills, in a secure place. • Use the Internet to your advantage. Paying bills online will prevent physical, mailed bills from sitting in your mailbox where someone could walk by and steal them. • Shred all personal documents, including old bills, receipts, credit card and mortgage offers, and other documents that contain your personal information. • When ordering products or services online, use only secure websites that have https:// in their web address and utilize Secure Socket Layer (SSL) and certificates to keep your transactions safe from hackers. It's also smart to print out your receipt or confirmation immediately after the transaction to have as a record of purchase. • Beware of phishing schemes, which involve receiving emails pretending to be from legitimate organizations that prompt you to visit phony websites.

If you've discovered that someone has stolen your identity:

• Contact the police immediately and file a report. • Use this police report to begin disputing fraudulent charges and accounts with your bank, creditors and credit bureaus. • Place a security freeze on your credit accounts before any new accounts can be opened in your name and further damage your credit.

How much to save

• Experts suggest saving at least 10% of your income. • Save for emergencies. When you are an adult and living on your own, you should have three to six months' of living expenses saved.

Main features to remember about prepaid cards:

• It's easy to budget and impossible to accrue debt, because you can spend only what you load onto the card. • No need to carry large amounts of cash. • Lets you make online purchases without a credit card. • Most provide the same type of "zero liability" protection as credit cards. • Some prepaid cards are limited to certain stores. • Many gift cards from retailers expire. Prior to the new Credit Card Accountability Responsibility and Disclosure Act (CARD Act) of 2009, gift cards typically expired after a year or two. The new law demands they don't expire for five years after issuance, or since last loaded with money, whichever occurred later. If you don't use all the funds on the card before that time, you lose the money. • Some prepaid cards charge fees, including a loading fee and monthly maintenance fee. Shop around for the best value.

Saving money will allow you to:

• Meet a very specific short-term goal (e.g., buying a new bicycle). • Be ready for the unexpected expenses (e.g., bicycle repair costs). • Plan for a future goal (e.g., saving for college or an apartment).

Main features to remember about debit cards:

• They are an easy and safe alternative to carrying cash. • Most provide "zero liability" which means you aren't responsible for charges if the card is lost or stolen. • There is no interest charged. • You can't go into debt with a debit card. • However, be careful not to run out of funds in your account, or you will be charged an overdraft fee for each transaction.

Main features to remember about credit cards:

• They let you shop now (online, on the phone, mail order) and pay later, without using cash. Very convenient for purchases such as airline tickets, hotel rooms and rental cars. • Used wisely, they can help you establish a good credit history. Abuse them and they can damage your financial future. • Provides "zero liability" protection, which means that if your card is lost or stolen you will not be responsible for unauthorized charges. • Many credit cards offer a rewards program that let you earn free airline miles, merchandise or cash back on purchases. • Credit card purchases are loans and you will pay interest on these loans unless you pay the balance in full each month • Credit cards make impulse buying easier, which can throw off your budget and increase your level of debt.