Chapter Four

Question 1

Debt:

Answer 1

money owed to another person or company

Question 2

____ is the most aggressively marketed product ever.

Answer 2

debt

Question 3

Visa, Mastercard, Discover, and American Express spend over $4 billion a year on ______ alone.

Answer 3

marketing

Question 4

There were no credit cards prior to ____

Answer 4

1958

Question 5

Once you turn 18 you become a large target for credit card marketing, because

Answer 5

people are often very loyal to their first credit card.

Question 6

Credit card tactics to look out for:

Answer 6

offering a low or zero interest introductory rate, requiring only the minimum monthly payment, and offering cash back and other rewards.

Question 7

Secured Credit:

Answer 7

is when you have to put down a security deposit or use something as collateral.

Question 8

Unsecured Credit

Answer 8

is when the lender doesn’t require you to put down a security deposit or collateral.

Question 9

Revolving credit:

Answer 9

credit that automatically renews whenever a payment is made to reduce the debt

Question 10

Collateral:

Answer 10

something owned offered as security on a debt; if the debt is not repaid as agreed, the item is forfeited to the lender.

Question 11

Lien:

Answer 11

a legal claim against an asset until the debut is repaid

Question 12

Appreciating Asset

Answer 12

an asset that increases in value over time

Question 13

Equity:

Answer 13

the increase in value of a home over time; the difference between the amount owed and what the home could be sold for.

Question 14

Default:

Answer 14

failure to repay a loan on time

Question 15

Installment credit

Answer 15

a loan for a fixed amount of money that’s paid back in monthly installments.

Question 16

Depreciating Asset

Answer 16

an asset that loses value over time, such as a car that’s worth less every year.

Question 17

Predatory lender:

Answer 17

a lender who uses deceptive, unfair, or fraudulent practices on borrowers who are desperate for cash.

Question 18

___ of Americans have a credit card

Answer 18

80%

Question 19

T/F: Personal loans often come with higher interest rates

Answer 19

True

Question 20

Credit Score:

Answer 20

a statistical number used to represent a consumer’s creditworthiness.

Question 21

Credit Bureau:

Answer 21

a company that collects credit rating information and makes it available to creditors.

Question 22

Seven common credit card fees:

Answer 22

annual fee, balance transfer fee, cash advance fee, finance charge, late payment fee, over-limit fee, and returned payment fee

Question 23

The average college student’s credit card debt is $____

Answer 23

1400

Question 24

Principal:

Answer 24

the original amount of a loan; the total amount borrowed before interest.

Question 25

Interest:

Answer 25

the additional cost a lender chargers for borrowing their money.

Question 26

Term:

Answer 26

the amount of time, in months, that you’ll be making payments.

Question 27

Depreciation:

Answer 27

the loss of value of an asset over time.

Question 28

Negative equity

Answer 28

when the value of an asset falls below what is owed on it.