Credit Test Review

Where do banks get the money to lend out to consumers?

• From their clients' credit card accounts

• From the Federal government

• From their clients' savings accounts

• From their own money vaults

How do banks make money off of the credit they issue?

• They charge a large, one-time fee at the start of the loan

• They take out a small fee each month from your checking account

• They charge a high interest rate on the loan

• This is a trick question - they DON'T make money!

Which of the following is NOT a typical type of credit?

• Pre-Paid Debit Card

• Credit Card

• Mortgage

• Overdraft

Which of the following is typically a SECURED loan?

• Overdraft

• Credit Card Balance

• Auto Loan

• Student loan

If the collateral for your secured loan can be taken away, why get a secured loan at all?

• Banks typically don't charge interest for the first 12 months

• Banks give you an extra 90 days to make a missed payment

• Because they usually have a higher interest rate

• Because they usually have a lower interest rate

What may NOT impact the interest rate on your loans?

• Your level of education

• Your relationship with the financial institution

• The loan amount

• Your credit score

True or False: A cosigner's credit history can be affected by the loan they are cosigned on.

• True

• False

Why does the amount of INTEREST you owe on a loan decrease over time?

• The institution trusts you more, so they lower the interest

• With each payment, principal increases; so interest lowers

• Banks are legally required to lower interest rates over time

• With each payment, principal decreases, so interest lowers

What is the purpose of a Schumer box when applying for a credit card?

• It gives a detailed explanation of your credit history

• It tracks your spending habits to help you find ways to budget your money

• It summarizes how much interest you have accrued in the last 90 days

• It summarizes information like interest rates, fees, and grace periods

How do you avoid paying interest on your credit card (or any other loan for that matter)?

• Always make the minimum payment over time

• Pay the principal 1st, then pay what you can on interest

• Always make the full payment on time

• Pay interest 1st, then pay what you can on leftover balance