Deck 6: Using Credit

Question 1

A credit limit refers to the maximum amount the cardholder can owe the issuer at any point in time.

Answer 1

True

Question 2

A debt safety ratio of 25% might be a signal of financial trouble ahead.

Answer 2

True

Question 3

One can be overusing credit even though he can afford to make minimum monthly payments on time.

Answer 3

True

Question 4

Credit cards with very low minimum payment requirements are in the consumer's best interest.

Question 5

The key to credit worthiness is to keep your debt safety ratio as high as possible.

Question 6

One should not use credit to purchase food,clothing,and other non-durables,even if it is only for convenience and the balance will be totally paid upon billing.

Question 7

Saving is the preferred way to provide for financial emergencies.

Question 8

Paying a loan ahead of schedule is one way to build a good credit rating.

Question 9

Always paying cash is helpful in establishing a high level of creditworthiness.

Question 10

The purpose of a credit report is to evaluate the kind of risk you pose to the lender.

Question 11

Using more than 20 percent of one's take-home income to pay off consumer debt is one of the signs that one may be headed for serious credit problems.

Question 12

Using credit is the ideal way to provide for financial emergencies.

Question 13

It is safe,and often required,to give your Social Security number as a form of identification when using a credit card.

Question 14

Credit should not consistently be used for nondurable goods.

Question 15

Having a checking account tells a creditor that you have some experience in managing your own funds.

Question 16

Paying only the minimum payment each time on a credit card usually enables one to pay off the balance fairly quickly.

Question 17

A debt safety ratio of 5% would generally be a signal of financial trouble ahead.

Question 18

Having arranged and fully repaid a small loan should help improve creditworthiness.

Question 19

The most common forms of open account credit are bank credit cards and retail charge cards.

Question 20

Credit report is routinely used to predict creditworthiness.

Question 21

Credit reports on individual borrowers are issued by credit bureau,a type of reporting agency.

Question 22

The interest rates on credit cards are lower than any other form of credit.

Question 23

Interest rates on credit cards tend to be lower than most other forms of consumer credit.

Question 24

Individuals with better credit ratings usually can secure higher credit limits.

Question 25

Open account credit is a form of credit extended to a consumer in advance of any transaction.

Question 26

Bank credit card cash advances will begin accruing interest charges immediately.

Question 27

Bank credit card purchases always begin accruing interest charges immediately.

Question 28

Being late on credit payments will put your account into a "late status" until you make up the missed payment.

Question 29

Credit cards often have penalties for late payment and for exceeding credit limits.

Question 30

Credit reports on individual borrowers are issued by credit card issuers.

Question 31

Nearly all credit cards have annual fees.

Question 32

Most organizations that issue credit cards have basically the same qualifications for card applicants.

Question 33

The grace period on a credit card starts on the billing date and ends on the date the lender should receive the payment.

Question 34

Thirty-day or regular charge accounts require the customers to pay off the debt 20 to 30 days after the billing date with no interest expense.

Question 35

Rebate credit cards work best for those who use the rebates,charge a lot,and do not carry high monthly balances.

Question 36

Credit card users can often avoid finance charges entirely by paying their total balances by the stated due date.

Question 37

The required monthly payment on an open account will be the smaller of a minimum dollar amount or a specified percentage of the balance.

Question 38

Bank credit cards represent the most common kind of open account credit.

Question 39

A retail credit card can be accessed by writing checks against demand deposit.

Question 40

The most common method used by lenders to apply finance charges to credit cards is the average daily balance including new purchases method.

Question 41

Your credit limit is determined by a number of factors,such as financial position,earning power,etc.

Question 42

Unsecured lines of credit provide tax advantages if you itemize deductions.

Question 43

An overdraft protection line of credit allows one to routinely bounce checks with little or no adverse consequences.

Question 44

Credit bureau files often include information such as political and religious affiliations in addition to financial information.

Question 45

Unsecured lines of credit are easy to use and often use some form of collateral as default protection.

Question 46

For someone with a good credit rating,lenders will typically lend up to 100% of equity in a home using a home equity credit line.

Question 47

Debit cards look like credit cards,but they work like checks.

Question 48

The proceeds of a home equity loan can be used for any purpose,and the interest paid is usually tax deductible.

Question 49

Revolving credit lines are often accessed by writing checks.

Question 50

Chapter 7 bankruptcies remain in your credit file for 12 years.

Question 51

Home equity loans are one of the least expensive forms of consumer credit.

Question 52

One can lose his home if he does not repay his home equity line of credit.

Question 53

For a fee,credit bureaus can provide credit scores for prospective borrowers.

Question 54

One can and should check his credit bureau file regularly.

Question 55

Student credit cards are structured much differently than regular credit cards.

Question 56

Secured credit cards require that the card holder puts up collateral in order to get the card.

Question 57

A credit applicant will be granted credit only after establishing a complete file at the local credit bureau.

Question 58

Debit cards are a form of credit that is very convenient to use.

Question 59

Credit bureaus provide information about prospective borrowers.

Question 60

Credit scoring systems are often used by lenders to determine your creditworthiness.

Question 61

Appropriate reasons to use credit include:

A) convenience.
B) durable expenses.
C) investment.
D) emergencies.
E) all of the above

Question 62

The intent of a Wage Earner Plan is to eliminate most of the debtor's obligations.

Question 63

Families who have a steady source of income and who want to retain their assets above the protected amount would selectChapter 13 rather thanChapter 7 of the bankruptcy code.

Question 64

AChapter 13 bankruptcy filing would result in the discharge of most of your debts.

Question 65

The decline in housing prices made it harder for households to refinance their mortgages.

Question 66

The amount of finance charges one pays on a credit card depends only on the annual percentage rate (APR)and the amount one charges.

Question 67

Identity theft is a growing problem that could damage your credit rating.

Question 68

It is recommended that you never give your credit card account number over the phone to people or organizations who call you.

Question 69

It is not a good idea to use credit for:

A) convenience.
B) durable expenses.
C) consumable items.
D) investments.
E) improving one's credit rating.

Question 70

The majority of persons filing bankruptcy fileChapter 7 of the bankruptcy code.

Question 71

The most common method of computing finance charges on a credit card is the average daily balance method including new purchases.

Question 72

The majority of reduction in consumer indebtedness is due to home and consumer loan defaults.

Question 73

The more credit cards one has,the better one's credit score.

Question 74

Finance charges are computed only on the unpaid balance from previous months' purchases.

Question 75

If you initiated the telephone call,it is okay to give your credit card account number when ordering/purchasing from major catalog houses,airlines,hotels,and so on.

Question 76

A credit card user's credit rating will be harmed if she pays only the minimum monthly payment on a credit card.

Question 77

It is not a good idea to use credit to:

A) buy a home.
B) live beyond one's means.
C) spread payments within a budget.
D) purchase expensive items.
E) replace a check for small items.

Question 78

The Wage Earner Planner requires debtors to give up most of their assets.

Question 79

Discount store and online sales have dropped in the aftermath of the recession.

Question 80

_____ would be a proper use of credit.

A) Purchase of a house
B) A financial emergency
C) Shopping convenience
D) Investing
E) All of these