PF 6.02, 6.03, 6.04

Leah is trying to explain the difference between open-end and close-end credit. Which statement should she include about close-end credit?

• It is a continuous loan with a revolving balance
• Equal payments are required on a regular basis until paid
• Credit limits vary
• Interest rates vary

When told to keep your use of credit within safe boundaries; that means:

• Total amount borrowed, including mortgage and car loan, under 20% of net income
• Total amount borrowed, including mortgage and car loan, under 40% of net income
• Total amount borrowed, not including her mortgage, under 20% of net income
• Total amount borrowed, not including her house, under 40% of her net income

David earns $5000 per month at his accounting job. He has a student loan ($120), and a car loan ($300). Which statement is true?

• Total debt is higher than the recommended amount
• Student loan s/b subtracted from his car loan payment to determine if he is w/in safe range
• Student loan payment is w/in range but not his car loan
• Credit payments are w/in the safe range for someone with his income

To answer the essay test question about open-end credit, Ryan should include which statement?

• A down-payment must be made before receiving a loan
• People are allowed to borrow an unlimited amount of money as long as they pay it back
• Credit is extended in advance so the borrower doesn't have to apply for credit each time credit is desired
• Payments are equal and required to be paid on a regular basis

Which statement below would explain the importance of understanding the process of borrowing money?

• When you are borrowing, you are spending future income
• Borrowing is an important part of a responsible financial plan
• Borrowing strongly affects the present self but has less impact on the future self
• Borrowing builds a strong credit history because it requires people to file a credit report

How can someone LEGALLY avoid paying interest when use a credit card?

• Pay the minimum balance every month before the due date
• Pay the balance in full every month before the due date
• Limit the use of a credit card to balance transfers only
• There is no legal way to avoid paying interest charges

Paying the minimum payment on a credit card every month will:

• Pay a large % of the total balance owed every month
• Make the final amount paid substantially higher than the amount initially charged to the card
• Help the cardholder create a plan for paying of credit in a decent amount of time
• Allow the cardholder to avoid paying any interest charges

Sarah turns 18 next month. She plans to apply for a credit card. Which statement is true?

• She cannot obtain a credit card until she turns 21
• She will need to use a special application since she is under 25
• She can only get a credit card if she has a co-signer or proof of sufficient income to make the required payments
• She can obtain a credit card

Megan's credit card statement indicates that she is now paying a penalty APR. Which scenario best describes what may have happened?

• Missed making January and February's payments
• Her payment has been paid in full each of the last 6 months
• Her card had a lower introductory rate; now the rate has increased
• New purchase made her account go over the credit limit

Which is a general rule when dealing with credit reports to minimize identity theft?

• Check each report once a year
• Wait 60 days before disputing wrong information found in a credit report
• Keep credit reports in an easily accessible location
• Report mistakes to only one credit bureau