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Financial Literacy - Chapter 4 - Credit & Debt Flashcards | StudBud
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Financial Literacy - Chapter 4 - Credit & Debt
Financial Literacy - Chapter 4 - Credit & Debt
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New Ramsey Curriculum
Flashcards
38 cards
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Practice quiz
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Questions
38
Answers
1
Something that credit card commercials don't show you is . . .
How happy your parents will be that theydon't have to lend you cash anymore
How much your credit score will growright away
People making payments for months for years on those credit card purchases
How great your life will be with payments
2
Credit isn't a wealth-building tool, it's a business that makes money for . . .
Stock market investors, tax agencies, and financial advisors
Credit card companies, banks, and lenders
Individuals who use credit cards
Local businesses and homebuilders
3
Banks and lenders use credit scores to determine . . .
A person's financial responsibility
How successful someone is
The likelihood that someone is able to repay debt
. How much collateral someone has availableto put up for a loan
4
The ________ is the total amount of the car loan, plus taxes and fees
Interest
Principal
Term
Value
5
There are certain things, like renting a car or booking a hotel room, that you cannot do without having a credit card.
False
True
6
Predatory lenders get their negative reputation from . . .
Discreetly selling personal bank information
Charging high fees for loans and targeting desperate people
Limiting the amount of time a borrower has to use a loan
Taking advantage of people during the great depression
7
Car lease agreements come with a stipulation that you must pay a penalty if you
Don't wash the car before returning it
Drive the car out of state
Go over the pre-established mileage cap
Don't park under a garage
8
Making purchases with a credit card means that you're borrowing money with interest, and __pay higher interest rates
Rich People
Young People
Old People
College Graduates
9
When looking over your credit report, it's important to make sure . . .
No lines of credit have been opened under your name without your knowledge
At least five businesses have requested your credit report
The information listed is over 10 years old
Your credit score is over 700
10
The Debt Snowball is a method where you take your time to payoff debt.
True
False
11
What is The Second Foundation?
Build wealth and give.
Save a $500 emergency fund.
Get out and stay out of debt
Pay cash for your car.
12
Your greatest tool to building wealth is ______.
Your income
Your credit Score
Tax Cuts
Single Stocks
13
Debt and credit are a bad idea because you are in a cycle of paying for your past.
True
False
14
Your brand new car is an appreciating asset.
False
True
15
What is the danger of putting up collateral for a loan?
There is no danger
You could lose the loan collateral if you fail to make the payments on time
You could get lost
Someone could steal it and then you have to get more money to buy it back
16
Once you turn 18, you should regularly check your credit report . . .
Only if you have a credit card
For errors or signs of identity fraud
To make a plan for improving your credit score
To keep an eye on your credit score
17
The fixer-upper house you bought as an investment is an appreciating asset.
False
True
18
_________require the borrower to put up collateral for the loan.
Revolving Credit
Interest Rates
Unsecured loans
Secured Loans
19
While it may not always appear so, the majority of Americans live paycheck to paycheck.
True
False
20
Your FICO score measures how wealthy you are and how much money you make.
False
True
21
A credit score is an indicator of how well someone pays off their debt, not how well they handle money.
True
False
22
Which is an example of an appreciating asset?
A new car purchased within the past 6 months
A home
A computer used for business purposes
A piece of farming equipment
23
Credit card companies charge stores a 2–3% fee for every purchase made with credit cards. This is called a(n) . . .
Over-the-limit fee
Annual fee
Cash advance fee
Merchant fee
24
When a homeowner gets a home equity line of credit (HELOC), that loan can only be used for home repairs and renovations.
False
True
25
The smartest way to buy a car is to _____.
Pay for it in cash
Finance it but pay the debt as quickly as you can
Take out a personal loan for it
Lease it
26
Credit card companies make the most profit from _ .
Government tax breaks
Partnering with companies to offer rewards to customers
Charging interest to customers who only pay part of their monthly debt
Incentive programs with banks customers
27
When you finance a new car, you will end up paying more than the sticker price.
False
True
28
Credit cards that offer flashy rewards like airline miles often . . .
Don't include protection against fraud
Have no interest fees
Charge a high annual fee
Can't be used for personal expenses
29
Loans that directly help you advance in life, such as student loans, are acceptable debts.
False
True
30
Marketing tactics used by the credit industry to trick you into going into debt include ___.
All of the above
They advertise Zero- or low-interest intro rates that come with hidden fees
They advertise minimum payment amounts, which keep you in debt for years
They advertise cash back percentages and rewards for using their card
31
The debt snowball method involves . . .
Waiting until the winter months to begin paying off debt
Pooling together money from other people to pay off your debt
Paying off debts from largest to smallest
Paying off debts from smallest to largest
32
When you buy with credit, you typically spend more than you would with cash or a debit card.
False
True
33
What way does the credit card industry make money off of it's customers?
Annual Fees
Interest Charges
Cash Advance Fees
All of the above
34
Which of the following is part of the formula that determines a person's FICO score?
The dollar amount in their savings funds
Income level during a 1-year period
Their history of payments made to lenders
The percent of income that they invest intomutual funds
35
A car is a depreciating asset.
True
False
36
How you spend and give your money . . .
Is a reflection of your personal values
Is the most important thing in life
Can't be changed, even if you try
Doesn't matter until you're in your 40s
37
Leasing a car is a method of financing where someone ______.
. Is paying off two or more vehicles at one time
Does not have to pay any taxes on thevehicle for the first six months
Makes monthly payments on but does not own the vehicle
. Never pays any interest or fees
38
What is the best way to avoid falling into debt?
Use airline miles earned through a creditcard to help pay for a vacation.
Use credit to pay for large expenses & have plenty of time to pay it off.
Take out a small loan for any purchases over$1,000.
Only buy things that you can purchase with cash
