Personal Finance Courses: Credit

Test your knowledge

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1.
Which of the following is a good reason to have a credit card?
Choose wisely. There is only one correct answer.
A credit card can be valuable in case an emergency exceeds your available funds on hand. A credit card can be a lifesaver if you have to pay for emergency expenses that go beyond your savings.
2.
When you pay back a loan, what are you typically paying?
Choose wisely. There is only one correct answer.
Principal plus interest. Generally, you pay back the principal plus interest over the life of the loan. In certain cases, though, you might pay just the interest for a while.
3.
If the annual percentage rate on your credit card is 18%, you will pay 18% interest on each month's balance.
Choose wisely. There is only one correct answer.
False. The APR refers to the interest rate for the whole year. For this month, it would be only 1/12 of that, which would be 1.5%.
4.
Shopping for a good credit card deal is easy because there are only a few large organizations that offer credit cards.
Choose wisely. There is only one correct answer.
False. There are thousands of banks, credit unions, and other organizations that offer credit cards.
5.
Which of the following is the largest part of your FICO score?
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Payment history. Your payment history carries more weight than any other measure.
6.
It is more cost effective for you to buy something outright than pay for it with credit.
Choose wisely. There is only one correct answer.
True. You can avoid finance charges this way.
7.
Which of the following actions are outside collection agencies legally allowed to take against you?
Choose wisely. There is only one correct answer.
None of the above. All these actions are illegal.