Question

ch 11 test personal finance
name:

1. a credit card provides the cardholder with

a) a secured loan
b) revolving open - end credit
c) installment credit
d) noninstallment credit

1. credit card billing occurs

a) weekly
b) bimonthly
c) monthly
d) annually

1. which of the following would you not find on your credit card statement?

a) purchases you made with the card during the billing period
b) your credit score
c) the minimum payment due
d) your previous balance

1. true/false an easy way to establish credit is to apply for a credit card.
2. true/false you will not have to pay interest on credit card debt as long as you pay the minimum

amount due on time each month.

1. true/false in order to obtain a credit card before the age of 21, you must have an adult cosign your

credit card application or provide proof that you have enough income to make payments.

1. true/false the process of applying for a credit card is very similar to the process of applying for a

personal loan.

1. true/false many credit card companies will extend credit to individuals with a currently low cash

inflow but a potentially high future cash inflow.

1. true/false during a weak economic period, creditors are likely to extend more credit to more

applicants.

1. true/false a credit card company will make money on the use of your card even if you pay

balance every month.

1. which of the following will allow you to exceed your credit limit?

a) overdraft protection
b) a grace period
c) a cash advance
d) credit equity

Explanation:

1. A credit card offers revolving open - end credit. A secured loan requires collateral (not typical for credit cards). Installment credit is for fixed - term loans (e.g., car loans). Noninstallment credit is for single - payment loans.
2. Credit card billing is monthly. Weekly and bimonthly are not standard, and annual billing would be too long for credit card transactions.
3. Credit scores are not on credit card statements. Statements include purchases, minimum payment, and previous balance.
4. Applying for a credit card and using it responsibly (paying on time) is an easy way to build credit.
5. To avoid interest, you need to pay the full balance, not just the minimum.
6. The Credit CARD Act requires those under 21 to have a cosigner or proof of income.
7. Applying for a credit card (checking credit, income) is similar to a personal loan (though personal loans may have more underwriting).
8. Credit card companies may consider future income (e.g., students with expected future earnings).
9. In a weak economy, creditors are more cautious (less likely to extend credit).
10. Credit card companies make money from merchant fees (even if you pay in full).
11. Overdraft protection (if opted in) can allow exceeding the credit limit (though it's a fee - based service). A grace period is for interest - free periods. A cash advance is a type of withdrawal. Credit equity is not a standard term here.

Answer:

1. B. revolving open - end credit
2. C. monthly
3. B. your credit score
4. TRUE
5. FALSE
6. TRUE
7. TRUE
8. TRUE
9. FALSE
10. TRUE
11. A. overdraft protection