ugba 135 midterm Q &A 2022
What is "good debt"? (Answer) Taking out loans in order to pay off a car, a mortgage
or an education or starting a business
What is considered "bad debt"? (Answer) - Borrowing money to support a lifestyle of
living beyond one's means
What is the definition of a Modern Day Millionaire? (Answer) - Financially independent,
no government assistance, living the life they want to lead
What is a credit card? (Answer) - An unsecured line of credit
- based on good faith and credit history
- this is a risk for a bank
What is a debit card? (Answer) - A secured line of credit
- the bank is taking no risk in issuing one of these
What is a charge card? (Answer) - Issued by a retailer allowing you to charge
purchases made only with their store
- store credit usually carries high rates or interest as high as 20 - 30% on unpaid
balances
What is prepaid card? (Answer) - Offered by banks and non- banks - not linked to
one's bank account
- entails high fees and interest
What is a payday loan? (Answer) - A high interest short term cash loan that is intended
to be repaid by future paychecks
What is installment debt? (Answer) - Money that is borrowed to purchase large items
such as a car or furniture paid over time
- borrower purchases the item and pays for it at regular intervals until the loan is paid
back in full
What is a deferred interest plan (Answer) A plan that enables a consumer to purchase
big - ticket items paying no interest or a low "teaser" rate of interest over a promotional
period.
What are Gift Cards? (Answer) - Stored value cards, usually for use at a specific
retailer or merchant
What is a cashier's check? (Answer) - A check purchased by you from a bank, payable
to a third party designated by you.
,What is a certified Check? (Answer) - A personal check the bank guarantees as being
supported by funds in your account
What is credit? (Answer) The amount of money a lender is willing to lend subject to
repayment terms and conditions such as interest, fees and penalties
What is Debt? (Answer) - The state of owing something such as money
What is a Debtor (or borrower)? (Answer) - A person or entity with debt which owes or
has the obligations to repay the debt
What is principle? (Answer) - The amount of money that is borrowed or loaned
What is interest (Answer) THE COST OF MONEY
- paid by the borrower to obtain the used of the principal or received by the lender for
providing the principal - expressed as APR (annual percentage rate)
What is the Fixed Rate of Interest? (Answer) - A loan with an interest rate that will
remain at a predetermined or "fixed" rate for the life or term of the loan - the rate does
not fluctuate.
What is an adjustable Rate of interest? (Answer) - A loan where the rate of interest is
not fixed but may change at various specified times
- most commonly foun din homes where the interest rate is established for a few years
and is then changed to a new rate for the balance of the loan
What is the "go - to" rate? (Answer) - The interest rate you are charged on upaid credit
card balances, in addition to the variable rate to determine the total rate of interest on
your account
What is revolving credit? (Answer) - credit or funds made available to you for use at
any time - subject to the terms of repayment - you can use your credit line over and over
again up to its limit - it revolves
What is the default rate? (Answer) - an accelerated rate of interest, typically 28 - 35%
charged on your credit balance as a penalty - didn't make minimum payment on due
date - or payment isn't honored by the bank such as a bounced check
What is the balance transfer fee? (Answer) - The fee which might be charge by a new
lender if you transfer the balance from your credit card provider t another
- typically the fee is 2 - 5 %
What is the grace period? (Answer) - A period in the billing cycle during which no
penalty is due as long as payment is received on time by the lender
, What is a stop payment? (Answer) - requesting the bank to reject a payment of a
check when presented
What are pitfalls to be aware of? (Answer) - When mailing the payment, must be
received by the date - not postmarked
How to reduce credit card debt? (Answer) - stop using your credit card
- save first, then make the purchase
- take an extra job or allocate extra money to pay down the balance
- use fist and bonuses to pay off the highest interest rate charges
- if you are carrying balances on several cards, make the minimum payment on all cards
-- if you cannot afford it, pay more on the account with the highest rate of interest and
the smallest balance.
- call your credit card issuer and ask for a lower rate
What do you do if you have fallen victim to credit card theft? (Answer) - call bank
immediately
- in the first 2 days - only liable for $50 losses
- after 2 days - liable to up to $500
- after 60 days, liable for everything
What do if you have fallen victim to credit card theft? (Answer) contact issuer or bank
immediately
- if you call within 2 days limited to $50 of losses
- if you call beyond 2 liable for up to $500 losses
- if you call after 60 days - fully liable
What is bankruptcy? (Answer) -It can negatively impact your credit score for up to 10
years, does not relieve you of obligations for taxes, alimony, child support or student
loans
Who does the Card Act apply to? (Answer) Only to consumers credit cards and NOT
to business credit cards
What are the 3 credit reporting agencies (Answer) - transunion
- equifax
- experian
What is a credit report? (Answer) An individual financial report which tells you whether
you have been making your credit card/loan payments on time and includes personal
information
What is a credit score? (Answer) This determined by credit report but it NOT located -
in order to change this number, you must have an improved credit report
What is "good debt"? (Answer) Taking out loans in order to pay off a car, a mortgage
or an education or starting a business
What is considered "bad debt"? (Answer) - Borrowing money to support a lifestyle of
living beyond one's means
What is the definition of a Modern Day Millionaire? (Answer) - Financially independent,
no government assistance, living the life they want to lead
What is a credit card? (Answer) - An unsecured line of credit
- based on good faith and credit history
- this is a risk for a bank
What is a debit card? (Answer) - A secured line of credit
- the bank is taking no risk in issuing one of these
What is a charge card? (Answer) - Issued by a retailer allowing you to charge
purchases made only with their store
- store credit usually carries high rates or interest as high as 20 - 30% on unpaid
balances
What is prepaid card? (Answer) - Offered by banks and non- banks - not linked to
one's bank account
- entails high fees and interest
What is a payday loan? (Answer) - A high interest short term cash loan that is intended
to be repaid by future paychecks
What is installment debt? (Answer) - Money that is borrowed to purchase large items
such as a car or furniture paid over time
- borrower purchases the item and pays for it at regular intervals until the loan is paid
back in full
What is a deferred interest plan (Answer) A plan that enables a consumer to purchase
big - ticket items paying no interest or a low "teaser" rate of interest over a promotional
period.
What are Gift Cards? (Answer) - Stored value cards, usually for use at a specific
retailer or merchant
What is a cashier's check? (Answer) - A check purchased by you from a bank, payable
to a third party designated by you.
,What is a certified Check? (Answer) - A personal check the bank guarantees as being
supported by funds in your account
What is credit? (Answer) The amount of money a lender is willing to lend subject to
repayment terms and conditions such as interest, fees and penalties
What is Debt? (Answer) - The state of owing something such as money
What is a Debtor (or borrower)? (Answer) - A person or entity with debt which owes or
has the obligations to repay the debt
What is principle? (Answer) - The amount of money that is borrowed or loaned
What is interest (Answer) THE COST OF MONEY
- paid by the borrower to obtain the used of the principal or received by the lender for
providing the principal - expressed as APR (annual percentage rate)
What is the Fixed Rate of Interest? (Answer) - A loan with an interest rate that will
remain at a predetermined or "fixed" rate for the life or term of the loan - the rate does
not fluctuate.
What is an adjustable Rate of interest? (Answer) - A loan where the rate of interest is
not fixed but may change at various specified times
- most commonly foun din homes where the interest rate is established for a few years
and is then changed to a new rate for the balance of the loan
What is the "go - to" rate? (Answer) - The interest rate you are charged on upaid credit
card balances, in addition to the variable rate to determine the total rate of interest on
your account
What is revolving credit? (Answer) - credit or funds made available to you for use at
any time - subject to the terms of repayment - you can use your credit line over and over
again up to its limit - it revolves
What is the default rate? (Answer) - an accelerated rate of interest, typically 28 - 35%
charged on your credit balance as a penalty - didn't make minimum payment on due
date - or payment isn't honored by the bank such as a bounced check
What is the balance transfer fee? (Answer) - The fee which might be charge by a new
lender if you transfer the balance from your credit card provider t another
- typically the fee is 2 - 5 %
What is the grace period? (Answer) - A period in the billing cycle during which no
penalty is due as long as payment is received on time by the lender
, What is a stop payment? (Answer) - requesting the bank to reject a payment of a
check when presented
What are pitfalls to be aware of? (Answer) - When mailing the payment, must be
received by the date - not postmarked
How to reduce credit card debt? (Answer) - stop using your credit card
- save first, then make the purchase
- take an extra job or allocate extra money to pay down the balance
- use fist and bonuses to pay off the highest interest rate charges
- if you are carrying balances on several cards, make the minimum payment on all cards
-- if you cannot afford it, pay more on the account with the highest rate of interest and
the smallest balance.
- call your credit card issuer and ask for a lower rate
What do you do if you have fallen victim to credit card theft? (Answer) - call bank
immediately
- in the first 2 days - only liable for $50 losses
- after 2 days - liable to up to $500
- after 60 days, liable for everything
What do if you have fallen victim to credit card theft? (Answer) contact issuer or bank
immediately
- if you call within 2 days limited to $50 of losses
- if you call beyond 2 liable for up to $500 losses
- if you call after 60 days - fully liable
What is bankruptcy? (Answer) -It can negatively impact your credit score for up to 10
years, does not relieve you of obligations for taxes, alimony, child support or student
loans
Who does the Card Act apply to? (Answer) Only to consumers credit cards and NOT
to business credit cards
What are the 3 credit reporting agencies (Answer) - transunion
- equifax
- experian
What is a credit report? (Answer) An individual financial report which tells you whether
you have been making your credit card/loan payments on time and includes personal
information
What is a credit score? (Answer) This determined by credit report but it NOT located -
in order to change this number, you must have an improved credit report
