Types of Credit

Each of the following financial products will help you build a credit history EXCEPT...

• Secured Credit card

• Debit Card

• Auto Loan

• Credit Card

Which of the following statements below is TRUE?

• The cardholder is carrying a balance over from the last period.

• The cardholder was charged interest on her balances for the last period because she made her payment on time.

• If the cardholder makes her minimum payment of $35.00 by the due date, she will NOT be charged interest on her balances.  

• If the cardholder pays $523.20 by the due date on the bill, she will pay NO interest to the credit card company.

Based on her current balance, how much credit does this cardholder have available to use?

• $0

• About $500

• About $1,600

• $2,100

Which of the following statements comparing credit and debit cards is TRUE?

• Far more businesses accept credit cards than debit cards

• Credit cards pull money directly from your bank account, while debit cards get their money from Visa or Mastercard

• Credit card companies provide you with a monthly statement, while debit cards do not

• With debit cards, you're spending your own money at point of sale, while with credit cards, you're promising to pay back the money eventually

What financial product am I? I am a type of credit card that requires cardholders to make a security deposit equal to the credit limit on their account. Due to this deposit requirement, I am often a good choice for young people looking to establish a credit history.

• Standard Credit Card

• Secured Credit Card

• Overdraft Credit Card

• Rewards Credit Card

 Which of the following is most likely to represent a fixed rate, secured debt?

• A student loan

• A credit card

• A loan from a friend

• A dealer-financed auto loan

Which of these statements best explains why it's often a good idea to pay more than the monthly amount due on an amortized loan?

• Every time you pay extra, the lender will reduce the interest rate they're charging by a small amount

• The extra payment will be applied to the principal amount you owe, which will pay down your debt more quickly

• The extra payment will be applied to the interest you owe, which will reduce the overall cost of your loan

• Amortized loans typically have much higher interest rates than credit cards, so they're the best place to put your extra cash

 If you are having trouble making auto loan payments, and are really following a tight budget, which recommendation below represents the WORST advice?

• Find an extra source of income by taking a second job, working longer hours, asking for a raise, etc

• Stop making payments on some of your debts so you can focus on getting the most expensive or largest debts under control

• Continue making all payments and call your lenders and see if you can negotiate lower monthly payments, lower interest rates, or longer terms

• Reduce spending in some other area of your budget so you can direct more funds toward debt payments

When loans are amortized, monthly payments are _______ , while the interest portion of the monthly payment ________  and the principal portion of the monthly payment _______  over time.

• Constant, Increases, Increases

• Constant, Decreases, Increases

• Variable, Decreases, Increases

• Variable, Decreases, Decreases

If you don’t proactively choose a different repayment plan option, your Federal student loans will default to the Standard Plan, which has a term of __________.

• 5%

• 10%

• 5 Years

• 10 Years