Types of Credit Quiz

Which statement is true about debit cards, prepaid debit cards, and credit cards?

• All 3 cards are completely different

• Debit cards and prepaid debit cards are the same

• Debit cards and credit cards are the same

• All 3 cards are completely the same

How high could the APR for a payday loan be?

• 40%

• 14%

• 400%

• 4%

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

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

• With debit cards, you're spending your own money at point of sale, but with credit cards, you're getting a loan that you need to pay back later

• Far more businesses accept credit cards than debit cards

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

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

• An auto loan

• A prepaid debit card

• A credit card

• A student loan

Why is it often a good idea to pay more than the monthly amount due on an amortized loan?

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

• 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 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?

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

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

• Explore whether a free or non-profit credit counseling service could help

• Find an extra source of income by taking a second job, working longer hours, or borrowing from family if they can afford to help

When loans are amortized, your monthly payments show that over time the amount applied to the principal ______ while the amount of your monthly payment applied to interest ______.

• Increases, Decreases

• Decreases, Decreases

• Increases, Increases

• Decreases, Increases

Which credit payback strategy would lead to the HIGHEST overall cost?

• Paying off your credit card bill in full every month

• Paying 20% of your credit card balance every month on time

• Making the minimum payment (3% of your credit card balance) every month on time

• Making the minimum payment (3% of your credit card balance) every month with an occasional late payment

What is an advantage of using a credit card?

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

• You can make an emergency purchase that you otherwise don't have the money to pay for right now

• If you need to carry a balance, the interest rates are generally quite low (less than 5%)

• It will not affect your credit score or credit history

Which of the following is true about fixed and adjustable-rate mortgages?

• Fixed-rate mortgages have a constant payment every month, but an interest rate that increases throughout the term of the loan

• Fixed-rate mortgages have a fixed interest rate for a few years, after which time the interest rate fluctuates according to general market conditions

• Adjustable-rate mortgages have a fixed interest rate for a few years, after which time the interest rate fluctuates according to general market conditions

• The two mortgages work the same way but are called different names depending if they come from a bank or a credit union