CreditCredit

Unit Unit

ReviewReview

JEOPARDY

Consumer creditConsumer credit

The use of credit for personal or individual needs.

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Interest or Finance ChargesInterest or Finance Charges

The periodic charge in exchange for the use of credit.

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Closed-end creditClosed-end credit

A one-time loan paid back over a specified period of time with payments of usually somewhat equal amounts.

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CreditorCreditor

An entity such as a bank, finance company, credit union, business or individual to whom money is owed.

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Open-end creditOpen-end credit

A right to borrow up to a specified amount of money, and where you are billed periodically based on the actual amount borrowed.

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CreditCredit

An arrangement to receive cash, goods, and services now and to pay for them in the future.

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TrueTrue

True or False: A mortgage is an example of closed-end credit.

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Line of credit or credit limitLine of credit or credit limit

The maximum amount of money the creditor will make available to you.

JEOPARDYA secured creditA secured creditcardcard

A credit card that requires you to maintain funds in a savings account from which the credit card bank will take money if you fail to pay your card balance.

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False (not borrowing False (not borrowing a specific amount)a specific amount)

True or False: A credit card is an example of closed-end credit.

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True or False: A home equity line of credit is an example of open-end credit.

TrueTrue

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C. The computer since it was C. The computer since it was bought with a credit cardbought with a credit card

Which of the following is considered an unsecured form of credit?

A. A mortgageB. A car loanC. A computer purchased with a

credit cardD. A home equity loan

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Annual Percentage Rate (APR)Annual Percentage Rate (APR)

The effective annual rate of interest on a loan based on a specific calculation as set forth by law.

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Convenience user Convenience user (or to banks: a deadbeat)(or to banks: a deadbeat)

What is the term for someone who pays their credit card balance in full each month.

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What is the term for someone who does not pay their credit card balance in full each month, and instead incurs finance charges.

A revolverA revolver

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No annual feeNo annual feeA long grace periodA long grace period

Name two features a convenience user seeks in a credit card.

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2 %2 %

What percent of your new balance do most credit card companies require you pay as a minimum each month?

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21 days21 days

The minimum grace period (in days) allowed by the C.A.R.D. Act (i.e. the new credit card law)

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A low interest rateA low interest rate

Name the single most important feature a revolver seeks in a credit card.

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To watch for identity theftTo watch for identity theft To identify errors about your credit To identify errors about your credit

history before you need to borrow history before you need to borrow money money

What is one reason why you should check your own credit report?

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False (they can charge whatever False (they can charge whatever fees and rates they want)fees and rates they want)

By law, banks cans charge whatever fees they want on credit cards, but they can’t charge more than 30% on any credit card.

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A credit report is a very detailed document about your credit history. A credit report is a very detailed document about your credit history. A FICO or credit score is a 3-digit number which provides your overall A FICO or credit score is a 3-digit number which provides your overall

credit worthiness. credit worthiness.

What is the difference between a credit report and a credit score?

JEOPARDY850850

What is the maximum FICO Score?

JEOPARDYB. 45 daysB. 45 days

According to the C.A.R.D. Act, how much notice must a credit card company give its customers when changing the terms of the cardholder contract?

A. 15 daysB. 45 daysC. 60 daysD. They can’t change the

contract

JEOPARDYA. 3A. 3

According to the C.A.R.D. Act, among the various credit card statement disclosures banks need to include, they must state how much must be paid each month to pay off the balance in ___ years.

A. 3 C. 10B. 5 D. 15

JEOPARDYUniversal Universal DefaultDefault

A clause in the cardholder’s contract that enabled the credit card company to increase your APR if they believed you became a higher risk. The C.A.R.D. Act now outlaws this practice.

JEOPARDYFalseFalse

True or False: Under the new C.A.R.D. Act, a bank must apply your payments to your balances that have the lowest rate of interest.

JEOPARDYD. Actually about 30 yearsD. Actually about 30 years(on the test the answer will always be the maximum years)(on the test the answer will always be the maximum years)

How many years does it take to pay off a $5,000 credit card bill at a 15% APR if you don’t incur any future charges, and pay only the minimum payment each month?

A. 5 yearsB. 10 yearsC. 15 yearsD. 20 or more years

JEOPARDYD. Actually $4,800D. Actually $4,800(on the test the answer will (on the test the answer will always be the maximum amount)always be the maximum amount)

How much in finance charges would you have paid on that $5,000 credit card purchase over the 30 years?

A. $1,500 or lessB. $2,500C. $3,500D. more than $4,500

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$50$50

If your credit card is stolen or lost, and someone makes illegal charges on your card, what is the maximum amount for which you are liable if you report it in a timely fashion?

JEOPARDYTrueTrue

True or False: Under the new C.A.R.D. Act, a bank can only increase your rate on future purchases not any balance outstanding before the rate increase.

JEOPARDYFalseFalse

True or False: The C.A.R.D. Act makes it easier for college students to obtain a credit card.

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False (that’s dumpster diving)False (that’s dumpster diving)

True or False: Phishing is the practice of looking through or stealing people’s garbage to find confidential personal information.

JEOPARDYTrueTrue

True or False: There is no legal limit on the amount of interest or fees that banks can charge for a credit card.

JEOPARDYE. All of the aboveE. All of the above

The C.A.R.D. Act requires which of the following to be disclosed on your credit card statement?

A. The number of years it will take to pay your balance if you pay only the minimum.

B. The cumulative interest you’ll pay in that time if you pay only the minimum.

C. The monthly amount you’d need to pay if you want to pay off your balance in 3 years.

D. Whom to contact if you need credit counseling service

E. All of the above must be disclosed

Let’s Play Let’s Play Final Final JeopardyJeopardy

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Name all the advantages and the disadvantages of having access to credit

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Allows you to have something now Allows you to have something now and pay for it later (e.g. home)and pay for it later (e.g. home)

You can combine several purchases You can combine several purchases into 1 monthly paymentinto 1 monthly payment

May be the only way to pay for or May be the only way to pay for or reserve something (hotel, car rental)reserve something (hotel, car rental)

It enables you to carry less cashIt enables you to carry less cash

Advantages of having access to credit:

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There is a cost associated with it: finance There is a cost associated with it: finance charges, late fees, etc.charges, late fees, etc.

The temptation to overspendThe temptation to overspend Failure to pay on time damages your Failure to pay on time damages your

financial reputationfinancial reputation Using some credit (such as credit cards) Using some credit (such as credit cards)

may be very problematic in a financial may be very problematic in a financial crisis such as loss of a jobcrisis such as loss of a job

More likely to be identity More likely to be identity theft victim theft victim

Disadvantage of having access to credit: