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71 Cards in this Set

  • Front
  • Back
The single best indicator of the true cost of credit is the...
annual percentage rate.*
The cost of borrowing money stated in dollars is the
finance charge.*
Credit whereby you borrow a specific amount to be repaid over a specified time period with nearly equal payments is called.
Installment credit*
When calculating the interest owed for the month on a credit card the lender multiplies the periodic rate times ___________?
the average daily balance*
If you report a lost or stolen credit card to your lender the most you can possibly lose is
$50.*
When you apply for credit the decision to accept you or not is made by the
the lender.*
If your credit card has an APR of 12% and your average daily balance is $1000 (no grace period), your interest for the month is
$10.*
A clause in a loan contract that makes all future payments immediately payable if the loan is in default is called a(n)
acceleration clause.*
If an item of collateral is repossessed, it may still be possible to owe more money because of a(n)
deficiency balance*
Which process refers to a court order to an employer to send a portion of a borrower’s wages to a lender to whom the borrower has defaulted ?
garnishment*
Under which type of bankruptcy are many of the debtors assets sold and the proceeds go to pay as much as possible on the debts?
Straight Bankruptcy (Chapter 7)*
The type of mortgage loan where the interest rate stays the same and the mortgage is for a specified number of years (e.g., 30) at that rate is called a
Conventional mortgage.*
Which of the following are tax advantages of buying a home on a mortgage?
a. Mortgage interest is tax-deductible
b. Real estate property taxes are tax-deductible
c. When you sell the home all or part of the profit (capital gains) can be exempt from taxes
The interest portion of the monthly payment on a fixed-rate mortgage
Goes down over the life of the mortgage.*
What is the monthly payment on a $200,000 home with $100,000 down for 20 years at 6%?
The answer is $716.43 obtained by using Table 9.3 on page 245.
If your credit card has an APR of 12% and your average daily balance is $1000 (no grace period), your interest for the month is
$10
notices that make insistent demands for payment on a credit account.
Dunning letters
What scores are the most prominent type of credit scoring system.
FICO®
Non-business debt used by consumers for purposes other than home mortgages is called
consumer credit.
A single-payment loan is an example of
noninstallment credit.
A loan taken out to pay all your other loans in an attempt to lower the total monthly payment is called a(n)
debt-consolidation loan.
Credit granted by public utilities that do not require that you pay in advance is referred to as
service credit
Which of the following allows you to provide information requested by a lender when you are applying for credit?
a credit application
The finance charge on most credit accounts is calculated by
multiplying the periodic rate times the average daily balance.
The law that requires that you be told the contents of your file at a credit bureau if you ask is the
Fair Credit Reporting Act.
Which of the following laws allows you to withhold payment for the disputed amount after notifying the lender if you are billed in error for an item on your credit card statement?
Fair Credit Billing Act
a credit arrangement where the borrower must repay the amount owed in a specific number of equal payments, usually monthly.
Installment credit is
a form of noninstallment credit.
Open-ended credit is
By law, the finance charge on a credit arrangement must include all mandatory charges including interest.
True
Bank credit card lenders are permitted to assess an annual fee ranging from
$25 to $50 (or more).
Travel and entertainment accounts work just like revolving charge accounts.
False
Very few people use service credit.
False
Credit bureaus make decisions for lenders as to whom to grant credit.
False
Secured credit cards use a bank savings account deposit as collateral.
True
If you do not pay the required amount on a revolving charge account by the due date, you will be in default.
True
Most credit card accounts have a grace period only if the previous balance was paid in full and on time.
True
Property offered and pledged to secure repayment of a loan and subject to seizure should the borrower fail to repay the loan is called
Collateral
A credit arrangement whereby the borrower agrees to repay the amount owed in a specific number of nearly equal payments is referred to as
Installment Credit
The single best indicator of the true cost of credit is the
Annual Percentage Rate
A charge for exceeding your credit limit on a credit card is called the
Over-limit-fee
What is the much higher interest rate charged by credit card lenders if the account holder has not followed the rules of the account?
Default rate
Standard bank cards with the logo of the sponsoring organization, such as the Sierra Club, imprinted on the face of the card are referred to as
Affinity Cards
A temporarily low interest rate used to entice a borrower to sign up for a new credit card is called a(n)
Introductory Rate
Which of the following is an assessment of the historical creditworthiness of an individual?
Credit Rating
Who decides your credit worthiness when you apply for credit?
The Lender
If you do not make additional charges on a credit card on which you are carrying a previous balance you can assume that paying the minimum payment will result in full repayment of the debt in about
Eight Years
Credit grantors often use credit ____________________ to assess the likelihood of repayment by an applicant.
Scores
Any time a debtor fails to pay the required principal or interest on time or otherwise fails to comply with a key requirement of a legal credit agreement they are said to be
In Default
The APR for a charge account divided by the number of billing periods per year is the
Periodic Rate
The time period between two billing dates on a credit card account is called the
Billing Cycle
In which of the following methods for computing the average daily balance might you be required to pay a finance charge even though you paid your balance in full during the previous month?
average daily balance including new purchases with no grace period
It is possible to carry a balance on a revolving charge account for years without ever paying the debts off completely.
True
A credit card grace period is the time period between the posting date of a transaction and the due date, within which any new credit card purchases will avoid finance charges.
True
Credit card billing errors can be corrected under procedures outlined in the Equal Credit Opportunity Act.
False
A credit arrangement that includes single-payment loans and open-ended credit is referred to as
noninstallment credit.
What the lender charges you in dollars to borrow money is called
The Finance Charge
You can continue to make use of a revolving account as long as
the amount owed is below your credit limit.
If a credit card lender feels that the account holder has had, or may have, trouble paying the debt, even if the problem is on another account with a different lender, they might declare the borrower to be in ________________ and begin charging a higher default rate. a
Universal Default
VISA and MasterCard are examples of
Bank Credit Card Accounts
A process for creating a statistical measure to rate applicants for credit on the basis of various factors relevant to creditworthiness and the likeliness of repayment is called
credit scoring.
Agencies that provide lenders with financial information on credit applicants are called
Credit Bureaus
If you fail to pay by the due date, you are said to be in
Default
Which of the following criteria can be legally used when rejecting a credit applicant?
Poor Credit History
Which of the following is usually an unnecessary expenditure because many companies waive credit card liability for lost or stolen cards and most people have such coverage under homeowners insurance?
Credit Card Insurance
Notices that make insistent demands for repayment of a debt are called
Dunning Letters
Which of the following need not be disclosed in advertising for credit cards and on credit card applications?
Finance Charge
The single best indicator of the true cost of credit is the
Annual Percentage Rate
The cost of borrowing money stated in dollars is the
Finance Charge
Credit whereby you borrow a specific amount to be repaid over a specified time period with nearly equal payments is called.
Installment Credit
When calculating the interest owed for the month on a credit card the lender multiplies the periodic rate times ___________?
Average Daily Balance
If you report a lost or stolen credit card to your lender the most you can possibly lose is
$50