CUT 2

1. Shira is trying to decide between getting a debit card, a prepaid debit card, and a credit card. Which statement is true?

• 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

3. 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, but with credit cards, you're getting a loan that you need to pay back later

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

• A student loan
• A credit card
• A prepaid debit card
• An auto loan

5. Which of these statements best explains why it's often a good idea to pay more than the monthly amount due on a 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

8. 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

11. Taylor is about to go car shopping, and she has $5000 saved that she can use for a down payment while still having extra cash in her emergency fund. She expects the exact model car she’s looking for to cost $35,000. If her top priority is having the lowest monthly payments possible, which advice should she follow?

• Put in $0 for your down payment, and choose a loan with a short term length
• Put in $2500 for your down payment, and choose a loan with a short term length
• Put in $3500 for your down payment, and choose a loan with a long term length
• Put in $5000 for your down payment, and choose a loan with a long term length

13. What is an advantage of using a credit card?

• It will not affect your credit score or credit history
• 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 5%)
• You can make an emergency purchase that you otherwise don’t have the money to pay for right now

15. A loan with a shorter term length will have __________ monthly payments, and you will pay __________ in total interest.

• higher, less
• higher, more
• lower, less
• lower, more

16. Select the statement below that accurately describes a characteristic of a credit card.

• You owe the same payment every month
• You must have money deposited into a checking account to use the credit card for purchases
• Making full payments on-time every month before your bill due is a way to avoid interest charges

• They do not charge interest

17. Which of the following statements is CORRECT about secured loans?

• They are a good choice to use for student loans
• If the borrower does not make payments, the lender can repossess the item
• In the event of default, the borrower loses nothing except for the down payment
• They usually have higher interest rates as compared with unsecured loans