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Chapter 6—Using Credit
a.
True
b.
False
67. The amount of finance charges one pays on a credit card depends only on APR and the amount one charges.
a.
True
b.
False
68. The intent of the Wage Earner Plan is to provide an alternative to straight bankruptcy.
a.
True
b.
False
69. A Chapter 13 bankruptcy filing results in the discharge of most of your debts.
a.
True
b.
False
70. Families who have a source of income and who want to retain their assets above the protected amount would select
Chapter 13 rather than Chapter 7 bankruptcy.
a.
True
b.
False
71. The majority of persons filing bankruptcy file Chapter 7 bankruptcy.
a.
True
b.
False
72. The Wage Earner Plan requires debtors to give up most of their assets.
a.
True
b.
False
Chapter 6—Using Credit
73. Before filing for bankruptcy, debtors should consider seeking the help of a credit counselor.
a.
True
b.
False
74. Filing Chapter 7 bankruptcy eliminates one's obligation to pay past-due alimony and child support payments.
a.
True
b.
False
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.
a.
True
b.
False
Chapter 6—Using Credit
76. If your credit card company increases your interest rate, the new rate can only be applied to new charges, not to
preexisting balances.
a.
True
b.
False
77. After the Credit Card Act of 2009 was passed, late payments dropped but defaults increased.
a.
True
b.
False
78. It is not a good idea to use credit
a.
for convenience.
b.
for durable goods.
c.
for consumable items.
d.
to partially finance investments.
e.
to improve one's credit rating.
Chapter 6—Using Credit
79. 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.
80. ____ would be an acceptable use of credit.
a.
Purchase of a house
b.
A financial emergency
c.
Shopping convenience
d.
Investing
e.
All of these
81. ____ is a benefit of using credit.
a.
The ability to buy expensive goods while spreading the payments over time
b.
Providing payments that fit into a budget
c.
Having a permanent record of transactions
d.
Being able to purchase goods and services when checks are not acceptable
e.
All of these.
Chapter 6—Using Credit
82. To establish creditworthiness you probably should first
a.
open savings and checking accounts.
b.
use credit extensively.
c.
arrange a small loan.
d.
pay cash for all purchases.
e.
arrange a large loan from close relatives.
83. ____ would be an indication of overspending.
a.
Having little or no savings
b.
Collection agencies calling you
c.
All of your credit cards charged to their limit
d.
Borrowing to pay for incidentals
e.
All of these
84. All of the following are useful ways to build a strong credit rating except
a.
Open checking and savings accounts.
b.
Open and use a charge account.
c.
Apply for a long-term loan and occasionally be late with a payment.
d.
Make payments on time.
e.
Talk with the lender if you foresee difficulty in making a payment.
Chapter 6—Using Credit
85. As a percent of take-home pay, monthly consumer credit payments should not exceed
a.
25%.
b.
20%.
c.
15%.
d.
10%.
e.
5%.
86. If your monthly before-tax income is $2,000 and your monthly take-home pay is $1,500, your maximum monthly
consumer credit payments should not exceed
a.
$600.
b.
$450.
c.
$400.
d.
$300.
e.
$200.
Chapter 6—Using Credit
87. Clare's gross salary is $36,000 annually and her after-tax income is $28,800. What is Clare's maximum recommended
monthly consumer credit payment?
a.
$600.
b.
$480.
c.
$450.
d.
$360.
e.
$200.
88. Open account credit is characterized by
a.
no credit limit.
b.
a monthly credit statement.
c.
annual billing.
d.
minimum balance requirements.
e.
none of the above.
89. With open account credit, one can often avoid interest charges if
a.
the account balance is paid in full every month.
b.
at least half the account balance is paid every month.
c.
the minimum payment is made every month.
d.
the account is a revolving credit account.
e.
the balance is below the credit limit.
Chapter 6—Using Credit
90. Mike has a MasterCard with an annual fee of $25, 18% interest, and a $1,000 credit limit. He always pays the total
outstanding balance monthly. His most recent monthly statement lists last month's payment, new charges this month
totaling $1,500, and a $30 fee. That fee is most likely
a.
the interest charges.
b.
his annual fee.
c.
an over-the-limit fee.
d.
a late-payment fee.
e.
a transaction fee on purchases.
91. ____ are not a type of open account credit.
a.
Retail charge cards
b.
30-day charge accounts
c.
Reward (co-branded) credit cards
d.
Bank credit cards
e.
Bank debit cards
92. Interest will almost always begin to accrue immediately when you use a bank credit card to
a.
make purchases.
b.
send payments.
Chapter 6—Using Credit
c.
compute finance charges.
d.
get a cash advance.
e.
all of these.
93. William uses his bank credit card frequently; however, he always pays off the total balance on the card each month.
What features should William especially look for in a credit card?
a.
Low annual fee and short grace period
b.
Low annual fee and low interest rate
c.
No annual fee and short grace period
d.
No annual fee and long grace period
e.
High annual fee and low interest rate
94. Ann Marie accumulated a large balance on her credit card while in college. She is trying to get it paid off as quickly as
possible and wants to roll the balance onto a new credit card. She now uses a credit card only for emergencies. What
should Ann Marie look for in a credit card given the large balance and the way she plans to use the card?
a.
low annual fee
b.
low APR
c.
long grace period
d.
average daily balance method excluding purchases
e.
two-cycle average daily balance method
Chapter 6—Using Credit
95. Rebate cards work best for those who use the rebates and
a.
charge large amounts on the card.
b.
pay the total card balance off monthly.
c.
carry high monthly balances.
d.
travel internationally
e.
a and b
96. Interest rates on ____ are typically lower than on any other form of consumer credit.
a.
reward credit cards
b.
debit cards
c.
credit cards
d.
home equity lines of credit
e.
unsecured personal credit
97. As well as being among the cheapest forms of consumer credit, these offer shelters from taxes:
a.
Automobile loans
b.
Home equity loans
c.
Credit cards
d.
Unsecured personal credit
Chapter 6—Using Credit
98. ____ cards offer the cardholder a way to contribute to a worthy cause, sometimes described as "painless
philanthropy."
a.
Reward
b.
Debit
c.
Credit
d.
Affinity
e.
Rebate
99. Persons with very poor credit ratings can still get ____ credit cards.
a.
secured
b.
student
c.
prestige
d.
affinity
e.
rebate
100. Student credit cards typically require that one be enrolled in a 2- or 4-year college/university and
Chapter 6—Using Credit
a.
a parent's signature.
b.
own a vehicle.
c.
hold a job.
d.
have some form of income.
e.
take at least nine hours.
101. Theresa is a bit of a spendthrift. She has trouble saying no when it comes to buying things. Which of the following
cards would keep her out of debt?
a.
debit
b.
credit
c.
affinity
d.
rebate
e.
prestige
102. Cards that can be used to pay for selected items with the amount of the transactions automatically subtracted from the
card value are called ____ cards.
a.
debit
b.
credit
c.
affinity
d.
prepaid
e.
prestige
Chapter 6—Using Credit
103. The ____ is really a second mortgage on your home.
a.
affinity card
b.
unsecured personal credit line
c.
home equity line of credit
d.
preferred Visa card
e.
platinum American Express card
104. Leon has a home valued at $216,000 and an outstanding mortgage of $140,000. If his lender is willing to provide a
home equity loan of up to 80% of market value, how much could Leon borrow using a home equity loan?
a.
$172,800
b.
$160,000
c.
$76,000
d.
$60,800
e.
$32,800
105. Haun and Mei have a home valued at $96,000 and an outstanding mortgage of $50,000. If their lender is willing to
provide a home equity loan of up to 85% of market value, how much could they borrow using a home equity loan?
a.
$14,400
b.
$31,600
Chapter 6—Using Credit
c.
$36,800
d.
$46,000
e.
$81,600
106. A problem with home equity loans is the
a.
high rate of interest on these loans.
b.
difficulty in qualifying for these loans.
c.
short-term nature of these loans.
d.
temptation to spread payments over a long term.
e.
tax disadvantages of these loans.
107. The lender uses a credit application to determine whether the borrower has the ____ to handle the debt.
a.
character and confidence
b.
confidence and capacity
c.
acumen and capacity
d.
character and capacity
e.
credit and character
Chapter 6—Using Credit
108. The quality of your credit rating is maintained by
a.
only using cash to make purchases.
b.
making credit payments early.
c.
seldom questioning billing errors.
d.
using multiple credit cards.
e.
meeting credit obligations as contracts require.
109. A ____ is an agency that provides credit information about individual borrowers to lenders.
a.
credit bureau
b.
consumer bureau
c.
credit statement
d.
bank
e.
credit scoring house
110. If the information on your credit report is in dispute, you are entitled to
a.
correct it.
b.
sue.
c.
erase it.
d.
supply your own explanation about the dispute.
e.
withdraw from the credit bureau.
