Quiz about 501-504 Vocabulary Practice Quiz (Credit Basics & Credit Cards)

Question 1

What is collateral in the context of credit?

Accepted Answer

An asset that a lender accepts as security for a loan.

Answer

The total wealth of an individual or organization.

Answer

The amount of money borrowed.

Answer

A small loan offered through a business.

Question 2

What does a fixed rate imply in a loan?

Accepted Answer

The interest rate remains constant during the duration of the loan.

Answer

The interest rate changes based on the debt size.

Answer

The interest rate varies each pay period.

Answer

The interest rate is extremely high and must be paid by the next paycheck.

Question 3

What is an installment loan used for?

Accepted Answer

To finance a specific purchase for a set amount of time with regular payments.

Answer

To pay the interest on a loan only.

Answer

To borrow money without any interest.

Answer

To provide a line of credit for any purchases.

Question 4

What is the definition of interest?

Accepted Answer

A sum paid for borrowing money, calculated as a percentage rate.

Answer

The total wealth of an individual minus liabilities.

Answer

The amount of money lent by an organization.

Answer

A specific asset used as collateral.

Question 5

Who is considered a lender?

Accepted Answer

An individual or organization that lends money.

Answer

An individual or organization that borrows money.

Answer

An individual or organization that provides collateral.

Answer

An individual or organization that charges a high interest rate for small loans.

Question 6

What does net worth represent?

Accepted Answer

The total wealth of an individual or organization, minus liabilities.

Answer

The interest rate charged for borrowing money.

Answer

The amount of money borrowed.

Answer

An asset accepted as security for a loan.

Question 7

What is a payday loan?

Accepted Answer

A small loan with a high interest rate meant to be paid by the next paycheck.

Answer

A loan with a variable interest rate.

Answer

A loan used to finance a specific purchase.

Answer

A loan that remains constant during its duration.

Question 8

What does the principal of a loan refer to?

Accepted Answer

The amount of money borrowed.

Answer

The asset used as collateral.

Answer

The high interest rate charged for a loan.

Answer

The total wealth of an individual or organization.

Question 9

What is the rate or interest rate in the context of borrowing money?

Accepted Answer

The percentage that a financial institution charges for borrowing money.

Answer

The line of credit that can be used for any purchases.

Answer

The asset that can be used as collateral.

Answer

The total wealth of an individual or organization.

Question 10

What is revolving credit?

Accepted Answer

An open line of credit that can be used as long as you're under the credit limit.

Answer

A loan with a fixed interest rate.

Answer

The amount of money borrowed.

Answer

A specific asset used as collateral.

Question 11

What is secured debt?

Accepted Answer

Debt that is tied to a specific asset that can be used as collateral.

Answer

A loan that must be paid by the next paycheck.

Answer

The total wealth of an individual or organization.

Answer

A sum paid for borrowing money.

Question 12

What does "Unsecured Debt" refer to?

Accepted Answer

Debt not tied to a specific asset; no collateral can be repossessed if the borrower defaults

Answer

Debt secured by a specific asset that can be repossessed

Answer

Debt that is tied to a variable interest rate

Answer

Debt that has a fixed repayment period

Question 13

What does "Variable Rate" mean in the context of a loan?

Accepted Answer

Interest rates can change during the duration of the loan based on the prime rate or an index rate

Answer

The interest rate is fixed for the duration of the loan

Answer

The interest rate does not change and is based on the borrower's credit score

Answer

The interest rate changes based on the amount of the loan

Question 14

What does A.P.R. stand for?

Accepted Answer

Annual Percentage Rate

Answer

Approved Personal Rate

Answer

Annual Personal Return

Answer

Automated Payment Requirement

Question 15

What is an annual fee in the context of credit cards?

Accepted Answer

A yearly fee that may be charged for having a credit card

Answer

A monthly fee for credit card usage

Answer

A one-time payment for opening a credit card account

Answer

A fee charged for each credit card transaction

Question 16

Who is an authorized user on a credit card?

Accepted Answer

A person who has permission to use and/or carry another person's credit card

Answer

A person who is legally responsible for paying the credit card bill

Answer

A person who owns the credit card

Answer

A person who is responsible for paying the annual fee

Question 17

What is a balance transfer?

Accepted Answer

The act of transferring debt from one credit card account to another

Answer

The act of depositing money into a credit card account

Answer

The act of paying off the full credit card balance at once

Answer

The act of checking your credit card balance online

Question 18

What is typically associated with a cash advance from a credit card?

Accepted Answer

A high interest rate or a fee

Answer

A low interest rate

Answer

No additional fees

Answer

Cashback rewards

Question 19

What does cash back refer to in the context of credit cards?

Accepted Answer

A credit card benefit that pays the cardholder a small percentage of their net expenditures

Answer

A fee charged for withdrawing cash from an ATM

Answer

A loan provided by the credit card company

Answer

The act of transferring a credit card balance to a bank account

Question 20

Who is a cosigner?

Accepted Answer

Someone who legally agrees to take responsibility for a person's debt if they cannot repay it

Answer

Someone who uses the credit card regularly

Answer

Someone who owns the credit card company

Answer

Someone who is authorized to use the credit card without owning it

Question 21

What is a credit card?

Accepted Answer

A plastic card that allows you to make purchases with borrowed money

Answer

A loyalty card that offers discounts at specific stores

Answer

A prepaid card that you can load with money for future use

Answer

A card that automatically pays your bills from your bank account

Question 22

What is a Credit Card Agreement?

Accepted Answer

A contract that outlines the terms and conditions for using your credit card.

Answer

The smallest amount of a credit card bill that a credit card holder must pay during a billing cycle.

Answer

A higher interest rate triggered by being late with or missing a credit card payment.

Answer

A fee charged if your payment is received after the due date.

Question 23

What is the purpose of a Grace Period in credit card terms?

Accepted Answer

To allow a borrower a certain number of days to pay the credit card bill without accruing interest or penalties.

Answer

To provide a low interest rate during the introductory period of a credit card.

Answer

To define the maximum amount that can be borrowed on a credit card.

Answer

To outline the terms and conditions for using a credit card.

Question 24

What is an Introductory APR?

Accepted Answer

The typically low interest rate charged during the initial period after a credit account is opened.

Answer

The fee charged if a credit card payment is late.

Answer

The smallest amount that must be paid during a billing cycle.

Answer

A higher interest rate for late or missed payments.

Question 25

What is a Late Payment Fee?

Accepted Answer

A fee charged if your payment is received after the due date.

Answer

The interest rate applied after the introductory period of a credit card.

Answer

The smallest amount that must be paid during a billing cycle.

Answer

The maximum amount that may be borrowed on a credit card.

Question 26

What does Penalty APR stand for?

Accepted Answer

A higher interest rate triggered by being late with or missing a credit card payment.

Answer

The smallest amount of a credit card bill that must be paid during a billing cycle.

Answer

The maximum amount that may be borrowed on a credit card.

Answer

The fee charged if a credit card payment is late.

Question 27

What is the purpose of the Schumer Box according to the federal Truth in Lending Act (TILA)?

Accepted Answer

To disclose the rates, fees, terms, and conditions of a credit card agreement

Answer

To provide a list of all credit card holders

Answer

To report credit card fraud

Answer

To track credit card transactions

Question 28

What does the Schumer Box require credit card companies to do?

Accepted Answer

To print long-term rate information in 18-point type or greater and remaining terms in at least 12-point type

Answer

To offer the lowest interest rates

Answer

To provide rewards for every purchase

Answer

To increase credit card fees annually

Question 29

What is a Secured Credit Card?

Accepted Answer

A type of credit card that requires the borrower to pay the company a fixed, up-front amount of money as collateral

Answer

A type of credit card that offers unlimited credit

Answer

A type of credit card that does not require any form of payment

Answer

A type of credit card that automatically increases the credit limit each month

Question 30

What are Payday Loans known for?

Accepted Answer

C) Being a small loan, offered at a high interest rate and meant to be paid as soon as you receive your next paycheck.

Answer

A) Being a long-term loan with a low interest rate.

Answer

B) Being a type of installment loan for auto purchases.

Answer

D) Being a loan with a fixed repayment schedule in regular installments.

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