Chapter 4 Flashcards
What is the largest purchase most consumers make that goes down in value?
A new car
Who is the number one target of credit card companies?
Teens
What is the most successfully marketed product in history?
Debt
MYTH: If I ____ I am helping a friend or relative
Loan money to a friend or relative
TRUTH: If you loan money to a friend or relative what will happen?
The relationship will be strained or destroyed
What is co-signing?
Agreeing to pay the debt if the debtor doesn’t pay
What is the problem with payday loans?
They have extremely high interest
What is the lottery?
A tax on the poor and on people who can’t do math
What is the best way to minimize the money lost on things that go down in value?
Buy slightly used
Never take out more than a ____ fixed rate mortgage
15-year
ARM stands for
Adjustable Rate Mortgage
What is an Adjustable Rate Mortgage?
A mortgage with an interest rate that changes based on market conditions
Why are ARMs bad?
If your rate adjusts higher or you lose your job, your payment can quickly become too much for you to afford
MYTH: You need a ____ to rent a car or make a purchase online or by phone
Credit card
TRUTH: A ____ does whatever a credit card does
Debit card
Why is it a bad idea to use a credit card with the intention to pay it off?
- When you use cash you spend 12-18% less
2. You may not be able to pay it off
What is the largest wealth-building tool?
Your income
Debt Snowball
Listing you debts in order from smallest to largest. Pay minimum payments on all your debts except for the smallest one, and attack that one with intensity
What is the fastest growing white-collar crime?
Identity theft
Annual Percentage Rate
Cost of borrowing money on an annual basis; takes into account the interest rate and other related fees on a loan
Depreciation
A decrease or loss in value
Loan Term
Time frame that a loan agreement is in force, and before or at the end of which the loan should either be repaid or renegotiated for another term
Credit card
Type of card issued by a bank that allows users to finance a purchase
T or F: You must establish credit in order to buy a house
False
T or F: If you are a victim or identity theft, you are only responsible for paying back half of the debt
False
What cannot be done with a debit card but can be done with a credit card?
Go into debt
What are forms of free money that aren’t repaid?
Scholarships and grants
Work Study
A program that allows students to work part time while continuing their studies
Associate’s Degree
An undergraduate academic degree awarded by colleges upon completion of a course of study lasting two years
FAFSA
A form that is completed annually by current and prospective college students to determine their eligibility for financial aid
Student loans are known by some people as
“Good Debt”
T or F: A four-year degree is necessary regardless of what career you’re pursuing
False
Types of Product Positioning
- Brand Recognition
- Color
- Shelf Positioning
- Packaging
What is a significant purchase?
Over $300
Buyer’s Remorse
When you wake up the next day and regret your purchase
Opportunity Cost
Consider spending your money on something else
Inflation
The persistent increase in the cost of goods and services or the persistent decline in the buying power of money
Financing
To buy an item with credit; paying over time
Latin term for “Buyer Beware”
Caveat Emptor
What are needs?
- Food
- Clothing
- Shelter
- Utilities
- Transportation
