Foolproof Financial Literacy Quiz

Mike will make more money because he is more valuable to his company. By taking work-related classes to improve his computer skills, Mike is enhancing his knowledge and abilities, making him more valuable as an employee. This increased value can lead to promotions, salary raises, or other opportunities for financial growth within the company. On the other hand, Dave's socializing and fitness activities may not directly contribute to his professional development or value to the company, therefore, he is less likely to see the same financial benefits as Mike.

Individuals are entitled to receive a free credit report once a year. This is a legal provision under the Fair Credit Reporting Act (FCRA). The purpose of providing free credit reports is to allow individuals to monitor their credit history and identify any errors or discrepancies. It is not proprietary information of the credit bureaus, and there is no fee required to obtain the annual free credit report. It is also not necessary to be denied credit in order to receive a free credit report.

A Certificate of Deposit (CD) is a financial instrument that is typically associated with saving rather than spending. When an individual purchases a CD, they are essentially lending money to a bank or financial institution for a fixed period of time in exchange for a higher interest rate. The funds are locked away and cannot be easily accessed or spent until the maturity date of the CD. Therefore, unlike cash, credit cards, and debit cards, which are all commonly used for spending, a Certificate of Deposit is not typically associated with immediate or regular spending activities.

APR stands for Annual Percentage Rate. It is a measure of the cost of credit, expressed as a yearly interest rate. APR takes into account not only the interest rate charged on a loan or credit card, but also any additional fees or charges associated with borrowing. By comparing APRs, consumers can make more informed decisions about which credit options are the most cost-effective for them.

The correct answer is "All of the above" because all three scenarios mentioned can lead to an increase in the interest rate on a credit card. If a payment is late or if the credit card holder exceeds their credit limit, it can be seen as a risk by the credit card company, resulting in a higher interest rate. Additionally, if the credit card company merges with another company, it may result in changes to the terms and conditions, including an increase in the interest rate.

Most ATM cards do not allow you to get cash anywhere in the world for no fee. While ATM cards do provide convenience for withdrawing cash, they often have limitations and fees when used internationally. These fees can include foreign transaction fees, currency conversion fees, and ATM withdrawal fees. Therefore, the statement that you can get cash anywhere in the world for no fee is not correct about most ATM cards.

Banks and other lenders have a system in place where they share the credit history of borrowers with each other. This means that if you have missed any loan payments, it is highly likely that other banks will be aware of it. Therefore, your bad loan payment record with one bank will not be overlooked if you apply to another bank for a loan. This statement highlights the importance of maintaining a good credit history as it can affect your chances of getting a loan from any bank or lender.

A debit card differs from a credit card in several ways. Firstly, there is no dispute resolution with a debit card under federal law, meaning that if there is an issue with a transaction, it may be more difficult to resolve. Secondly, a debit card does not usually appear on your credit report, as it is not a form of credit. Lastly, if there are any unauthorized transactions on your debit card, you may be responsible for the total amount. Therefore, all of the statements mentioned are correct.

Jessica, who only pays the minimum amount each month, is likely to pay the greatest dollar amount in finance charges per year. This is because by only paying the minimum amount, she carries a balance on her credit card from month to month. This balance accrues interest, resulting in finance charges. Since Jessica consistently pays only the minimum amount, the balance and the corresponding finance charges continue to accumulate over time, leading to a higher overall dollar amount in finance charges per year compared to the other credit card users.

A creditor has 30 days to acknowledge a written complaint about a billing error. This means that once the creditor receives the complaint, they are required to send a response or acknowledgement within 30 days. This allows the creditor sufficient time to review the complaint and initiate any necessary actions to resolve the billing error.

Negative financial information, such as late payments, collections, and charge-offs, can stay on your credit report for 7 years. This information can have a significant impact on your credit score and make it more difficult to obtain credit in the future. It is important to maintain good financial habits and make timely payments to avoid negative information staying on your credit report for an extended period of time.

Eric will pay less because the car is collateral for the loan. When a loan is secured by collateral, such as a car, it reduces the risk for the lender. In case of default, the lender can repossess the car and sell it to recover their money. This lower risk allows the lender to offer a lower finance charge or interest rate. In contrast, Matt's loan for a vacation does not have any collateral, making it a riskier loan for the lender, resulting in a higher finance charge.

Credit unions are member-owned financial institutions that typically have lower overhead costs compared to other types of financial institutions. This is because credit unions are not-for-profit organizations and their main focus is to serve their members rather than generate profits. As a result, credit unions often offer better interest rates on loans and higher interest rates on savings accounts compared to banks. Therefore, credit unions are generally considered to have the lowest overhead with the best interest rates.

Borrowing money to buy a car that will lead to a much better paying job can be financially beneficial because the increased income from the better job can help repay the loan. In this scenario, the investment in the car can be seen as an investment in one's career and future earning potential. The potential increase in income can outweigh the cost of borrowing, making it a financially advantageous decision.

When you are charged an "over-the-limit" fee on your credit card, it means that you have exceeded your credit card limit. The correct answer states that you will be charged a fee every month until you reduce your balance to under the credit card limit. This implies that the fee is recurring and will continue to be charged until you bring your balance back within the allowed limit. This is a common practice by credit card companies as a penalty for exceeding the credit limit and serves as an incentive for customers to reduce their balance and avoid further fees.

Individuals have the right to check their credit history for accuracy once a year for free. This is mandated by the Fair Credit Reporting Act (FCRA), which allows individuals to request a free copy of their credit report from each of the three major credit bureaus (Equifax, Experian, and TransUnion) once every 12 months. This helps individuals monitor their credit, detect any errors or fraudulent activity, and take necessary steps to address them.

According to Federal law, if you notify the issuer of your stolen credit card as soon as you discover it is missing, the maximum amount you can be forced to pay is $50. This is because the law states that the cardholder is only responsible for up to $50 of unauthorized charges made on a stolen credit card. The remaining amount will be covered by the credit card issuer.

The answer "Just under 5 years" is correct because if you make minimum payments of $60 each month on a $2,000 balance with a 24% APR, it will take approximately 59 months (or just under 5 years) to pay off the computer. This calculation assumes that no additional charges or fees are added to the credit card balance during this time.

The correct answer states that income tax may be charged on the interest if your income is high enough. This means that if you earn a certain amount of income from the interest on your savings account, you may be required to pay income tax on that amount. This is because interest earned is considered a form of income, and income tax is applied based on your overall income level. The other options are incorrect as they either refer to sales tax, age restrictions, or the taxability of savings account interest.

The credit card company is likely to start Barbara out with a small line of credit to see how she handles the account because she is an 18-year-old with no credit history and few valuable possessions. This allows the credit card company to minimize its risk by limiting the amount of credit extended to Barbara initially. By monitoring her spending and repayment habits, the company can assess her creditworthiness and determine if she is a responsible borrower before granting her a higher line of credit.