Unit 4 Test Review - Credit

What is one benefit of borrowing money from a friend or family member instead of from the bank?

• You don't have to repay your friends or family if you don't want to
• You can borrow more money from a friend or family member because they have more cash than banks
• Friends and family cannot legally charge you interest on the loan, but banks can
• Friends and family will typically work with you to set up a repayment plan you can afford

What's a potential downside of asking a friend for a loan?

• A friend will have to give you the money, even if they don't want to

• As soon as they lend you the money, you won't be able to be friends any more

• It might cause problems in your friendship if you don't repay them on time

• Businesses won't accept borrowed money

What is the key difference between a credit card and a debit card?

• Credit cards allow you to borrow money to pay for things, while debit cards take money straight from your own checking account
• Wealthy people use credit cards, while people with lower incomes use debit cards
• Credit cards come from credit unions, while debit cards come from banks
• You can only use credit cards if you are over 25, but you can use debit cards as long as you are over 18

What question is MOST useful in helping you decide to get either a credit card or a bank loan?

• Are you responsible with your money?
• Are you trying to make a bunch of small purchases over time or one large purchase?
• Are you using the money to purchase an item that is a need or a want?
• How much money do you have in your bank account?

What's one reason you should be careful about using credit?

• Credit will take the money straight from your checking account, lowering your bank balance

• Credit will force you to pay taxes on your purchase

• Credit will charge you interest every month until you repay your full balance

• Credit will force you to buy a cheaper bike than you could with debit

Which statement about credit card interest rates is TRUE?

• The more money you spend on purchases, the higher your interest rate will be
• A high interest rate means you'll pay MORE money total
• A high interst rate means you'll pay LESS money total
• Most credit cards do not charge any interest rate

Which age group tends to have the most credit card debt?

• Young adults
• Middle-aged people
• Senior citizens
• Credit card debt is evenly distributed among all age groups

What is the best way to avoid going into large debt on your credit card?

• Avoid paying the bill every month so your bank account stays high
• Pay the minimum monthly payment on time every month
• Pay half your balance every month
• Pay your full balance every month

Each of the following factors impacts your credit score EXCEPT...

• Payment history
• Bank account balance
• Mix of credit types
• Length of credit history

Which of the following is a prime credit score?

• 350
• 550
• 750
• 950