PFM - Chapter 4, Lesson 1

Question 1

What are credit card companies not telling you?

Answer 1

That people pay months and even years for the purchases they make with their credit card.

Question 2

True or False: Student loans are “good debt” because they will help you with your future?

Answer 2

FALSE

Question 3

What is debt?

Answer 3

Money owed to another person or company.

Question 4

What is your greatest wealth-building tool?

Answer 4

Your income

Question 5

True or False: Credit is not a tool that makes your life better.

Answer 5

True

Question 6

Who makes money from credit?

Answer 6

1) Credit Card Companies
2) Banks
3) Lenders

Question 7

How do credit card companies make their biggest profit?

Answer 7

When people carry over their balance from one month to the next?
- The company continues to charge the same rate of interest each month, and it begins to compound on itself. (Like compound interest, but in a bad way this time.)

Question 8

What kind of interest is made on the balance of debt each month?

Answer 8

Accrued interest

Question 9

When people use credit cards, they are actually spending ____________ than they originally spent.

Answer 9

MORE

Question 10

You become a target for credit card companies when you turn how old?

Answer 10

18 years old

Question 11

Why?

Answer 11

1) People are usually loyal to their first credit card
2) Young people pay higher interest rates

Question 12

Three ways credit card companies rope you in:

Answer 12

1) Offering a low-or-zero interest introductory rate
- This period only lasts a certain amount of time; later, you get hit with higher fees
2) Requiring only the minimum monthly payment
- Only cover interest charges; not really paying anything on the actual debt
3) Offering cash back and other rewards
- Only offer actually very small rewards