Standard 5: Credit/Debt

Interest is not charged by the credit card company if you pay your balance in full by the due date.

• True

• False

The interest rate you pay on financed purchases on your credit card is known as the?

• Variable Rate Period (VPR)

• Annual Percentage Rate (APR)

• Annual Membership Fee (AMF)

• Variable Percentage Rate (VPR)

Which of the following is an advantage of using a credit card?

• Using it will always negatively affect your credit score.

• Since it is tied directly to your checking account, it prevents you from spending money you do not have.

• If you need to carry a balance, the interest rates are generally quite low (less than 7%)

• If you pay off your balance every month in full, it is similar to a short-term interest-free loan.

Which of the following is TRUE about credit cards?

• It is the easiest way to establish credit.

• You have to pay interest on ALL purchases.

• All credit cards have an annual fee.

• Interest rates on credit cards are determined by your credit score.

What is true about a variable interest rate loan?

• The interest rate can vary during the length of the loan.

• The amount of interest paid varies each month.

• Both answers are correct.

• None of the answers are correct.

Amortizing a $60,000 loan at 4% over 3 years. The payment for 36 months will be $1,771.44.

• Over time, the interest portion goes up

• Over time, the principal portion goes down

• The interest paid over the life of the loan will be the same every month

• Over time, the principal portion that is paid every month goes up

It is recommended that your monthly loan payments (INCLUDING your home mortgage) should not be over what percentage of your gross monthly income?

• 10%

• 16%

• 20%

• 36%

It is recommended that your monthly loan payments (not including your home mortgage) should not be over what percentage of your net monthly income?

• 10%

• 16%

• 20%

• 36%

Secured loans typically have a higher interest rate than unsecured loans.

• True

• False

When would a variable rate loan be the most dangerous to consumers?

• When interest rates rise.

• When interest rates stay the same.

• When interest rates fall.