Credit And Credit Cards Pre-test

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| By Phbhenry
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Phbhenry
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Quizzes Created: 1 | Total Attempts: 4,920
Questions: 24 | Attempts: 4,921

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Credit And Credit Cards Pre-test - Quiz


Questions and Answers
  • 1. 

    Most credit cards charge you interest even if you pay your balance in full each month.

    • A.

      True

    • B.

      False

    Correct Answer
    B. False
    Explanation
    Most credit cards do not charge interest if you pay your balance in full each month. This is because credit card companies make money primarily through the interest charged on unpaid balances. If you consistently pay off your balance in full, you can avoid paying any interest charges. However, it is important to note that some credit cards may have other fees or charges, such as annual fees or foreign transaction fees, even if you pay your balance in full.

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  • 2. 

    Credit card companies don't like to give credit cards to people in their late teens and early twenties.

    • A.

      True

    • B.

      False

    Correct Answer
    B. False
    Explanation
    Credit card companies do not have a general aversion to giving credit cards to people in their late teens and early twenties. In fact, many credit card companies specifically target this demographic as potential customers. However, individuals in this age group may face certain challenges in obtaining a credit card due to their limited credit history or lack of steady income. So, while it is not entirely accurate to say that credit card companies do not like to give credit cards to people in their late teens and early twenties, it is also not completely false as there may be some hurdles in the process.

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  • 3. 

    Your credit rating may be checked when you try to rent an apartment.

    • A.

      True

    • B.

      False

    Correct Answer
    A. True
    Explanation
    When trying to rent an apartment, it is common for landlords or property managers to check the credit rating of potential tenants. This is done to assess the financial responsibility and reliability of the individual. A good credit rating indicates that the person has a history of paying bills on time and managing their finances well, making them a more desirable tenant. Therefore, it is true that your credit rating may be checked when you try to rent an apartment.

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  • 4. 

    A "store credit card" is a credit card that can only be used at one company's store.

    • A.

      True

    • B.

      False

    Correct Answer
    A. True
    Explanation
    A "store credit card" is indeed a credit card that is limited to being used at only one company's store. Unlike regular credit cards that can be used at various merchants, store credit cards are specifically designed to be used for purchases within a particular store or retail chain. These cards often come with exclusive benefits and rewards programs that are tied to the specific store, encouraging customer loyalty and repeat purchases. Therefore, the statement "A 'store credit card' is a credit card that can only be used at one company's store" is true.

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  • 5. 

    Your "credit line" is the maximum balance the credit card company will allow you to have.

    • A.

      True

    • B.

      False

    Correct Answer
    A. True
    Explanation
    The given statement is true. A credit line refers to the maximum balance that a credit card company allows an individual to have. It represents the maximum amount of credit that can be borrowed on the card. This limit is determined by factors such as the individual's credit history, income, and the credit card company's policies. It is important for cardholders to stay within their credit limit to avoid penalties or fees.

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  • 6. 

    It is not a good idea to pay your balance in full each month because this will upset the credit card company.

    • A.

      True

    • B.

      False

    Correct Answer
    B. False
    Explanation
    This statement is false. It is actually a good idea to pay your balance in full each month. Paying the balance in full helps to avoid accumulating interest charges and keeps your credit utilization low, which can positively impact your credit score. Paying in full also shows responsible financial behavior to the credit card company, which can lead to potential benefits such as higher credit limits or lower interest rates.

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  • 7. 

    All credit cards have an annual fee that you must pay to the credit card company.

    • A.

      True

    • B.

      False

    Correct Answer
    B. False
    Explanation
    This statement is false because not all credit cards have an annual fee. While some credit cards do charge an annual fee, there are many credit cards available that do not have an annual fee. These no-annual-fee credit cards are often offered by banks and financial institutions as a way to attract customers and provide them with a cost-effective credit card option. Therefore, it is not accurate to say that all credit cards have an annual fee.

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  • 8. 

    Credit card companies can charge you a late fee even if you are only a couple of days late.

    • A.

      True

    • B.

      False

    Correct Answer
    A. True
    Explanation
    Credit card companies can charge a late fee even if you are only a couple of days late because the terms and conditions of credit card agreements typically state that a late fee will be charged if the payment is not received by the due date. This is a common practice among credit card companies to incentivize timely payments and to compensate for the administrative costs associated with late payments. Therefore, it is important to always make credit card payments on time to avoid incurring unnecessary fees.

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  • 9. 

    Credit cards can only be used to buy things.  They cannot be used to obtain cash.

    • A.

      True

    • B.

      False

    Correct Answer
    B. False
    Explanation
    Credit cards can be used to buy things, but they can also be used to obtain cash. This can be done through cash advances, where the cardholder can withdraw cash from an ATM or receive cash from a bank or financial institution. However, it is important to note that cash advances usually come with additional fees and higher interest rates compared to regular purchases. Therefore, the statement that credit cards cannot be used to obtain cash is false.

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  • 10. 

    If you fall behind on your credit card payments, the credit card company is not allowed to report this to anyone.  This is confidential information.

    • A.

      True

    • B.

      False

    Correct Answer
    B. False
    Explanation
    If you fall behind on your credit card payments, the credit card company is allowed to report this to credit bureaus and other financial institutions. This information is not confidential and can affect your credit score and ability to get credit in the future.

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  • 11. 

    When applying for a new job, your potential new employer can check your credit file with your permission.

    • A.

      True

    • B.

      False

    Correct Answer
    A. True
    Explanation
    When applying for a new job, it is true that your potential employer can check your credit file with your permission. This is because employers often use credit checks as part of the hiring process to assess an applicant's financial responsibility and trustworthiness. By reviewing an individual's credit history, employers can gain insights into their ability to manage their finances, handle sensitive information, and make responsible decisions. However, it is important to note that in some countries, there may be legal restrictions on the extent to which employers can use credit checks in the hiring process.

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  • 12. 

    It is best to close all credit card accounts and deal only in cash to improve your credit score.

    • A.

      True

    • B.

      False

    Correct Answer
    B. False
    Explanation
    Closing credit card accounts can actually have a negative impact on your credit score. This is because credit utilization, which is the ratio of your credit card balances to your credit limits, is an important factor in calculating your credit score. By closing credit card accounts, you reduce your available credit limit, which can increase your credit utilization ratio. It is generally recommended to keep credit card accounts open, even if you don't use them, in order to maintain a low credit utilization ratio and improve your credit score.

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  • 13. 

    Insurance companies can determine what rates you will pay for car insurance based on your credit score.

    • A.

      True

    • B.

      False

    Correct Answer
    A. True
    Explanation
    Insurance companies can determine what rates you will pay for car insurance based on your credit score. This is because studies have shown a correlation between a person's credit score and their likelihood of filing a claim. Insurance companies use this information to assess the risk of insuring an individual and adjust their rates accordingly. A higher credit score is often associated with responsible financial behavior, which suggests that the individual is less likely to engage in risky driving habits or file frequent claims. Therefore, individuals with higher credit scores are generally offered lower insurance rates.

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  • 14. 

    Having a low credit score is a good thing.

    • A.

      True

    • B.

      False

    Correct Answer
    B. False
    Explanation
    Having a low credit score is not a good thing. A low credit score indicates that an individual has a history of late or missed payments, high credit utilization, or other negative factors that make them a higher risk for lenders. This can result in difficulty obtaining loans or credit cards, higher interest rates, and limited financial opportunities. Therefore, it is not beneficial to have a low credit score.

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  • 15. 

    Interest rates you pay on your home loan are based upon your credit score.

    • A.

      True

    • B.

      False

    Correct Answer
    A. True
    Explanation
    The interest rates on a home loan are indeed determined by your credit score. Lenders use credit scores to assess the risk of lending money to borrowers. A higher credit score indicates a lower risk, so borrowers with higher scores are offered lower interest rates. Conversely, borrowers with lower credit scores are considered higher risk and are charged higher interest rates to compensate for that risk. Therefore, it is true that the interest rates on a home loan are based on your credit score.

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  • 16. 

    If you have filed bankruptcy, that information remains in your credit file for 10 years.

    • A.

      True

    • B.

      False

    Correct Answer
    A. True
    Explanation
    If you have filed for bankruptcy, it will stay on your credit file for a period of 10 years. This means that lenders and creditors will be able to see this information when assessing your creditworthiness during that time. Filing for bankruptcy can have a significant impact on your credit score and make it difficult to obtain credit or loans in the future. It is important to note that even after the 10-year period, the bankruptcy may still be taken into consideration by some lenders when making credit decisions.

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  • 17. 

    Credit information that is collected for your credit report can be obtained from stores where you have credit accounts, your bank or credit union, or other businesses where you have accounts.

    • A.

      True

    • B.

      False

    Correct Answer
    A. True
    Explanation
    The statement is true because credit information for your credit report can indeed be collected from various sources such as stores where you have credit accounts, your bank or credit union, or other businesses where you have accounts. These entities regularly report your credit activities to credit bureaus, which compile this information to create your credit report.

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  • 18. 

    Opening several new credit accounts within one month will improve your credit score as that shows that you are creditworthy.

    • A.

      True

    • B.

      False

    Correct Answer
    B. False
    Explanation
    Opening several new credit accounts within one month can actually have a negative impact on your credit score. This is because it can be seen as a sign of financial instability and a higher risk of defaulting on payments. Lenders may view this behavior as a red flag and it can lower your credit score. It is generally recommended to only open new credit accounts when necessary and to do so gradually over time.

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  • 19. 

    All credit cards

    • A.

      Have the same credit limit.

    • B.

      Must be used each month or they become inactive.

    • C.

      Have an annual fee.

    • D.

      None of the above.

    Correct Answer
    D. None of the above.
    Explanation
    The correct answer is "None of the above." This means that none of the statements provided in the options are true. The given options state that all credit cards have the same credit limit, must be used each month to avoid becoming inactive, or have an annual fee. However, these statements are not universally true for all credit cards. Different credit cards may have different credit limits, usage requirements, and fees. Therefore, the correct answer is that none of the options accurately describe all credit cards.

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  • 20. 

    A credit report

    • A.

      Is produced monthly by the federal government.

    • B.

      Is changed only once a year.

    • C.

      Is a financial report card.

    • D.

      Is usually only of interest to individuals who plan to purchase a house.

    Correct Answer
    C. Is a financial report card.
    Explanation
    A credit report is often referred to as a financial report card because it provides a comprehensive overview of an individual's credit history and financial behavior. It includes information about their borrowing and repayment habits, such as credit card usage, loan payments, and any outstanding debts. Lenders, landlords, and other financial institutions use credit reports to assess an individual's creditworthiness and determine their ability to repay loans or debts. It is an important tool for individuals to understand their financial standing and make informed decisions regarding borrowing or purchasing.

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  • 21. 

    When you use a credit card...

    • A.

      You are withdrawing money from savings.

    • B.

      You are borrowing money from checking.

    • C.

      Your bank is loaning you money.

    • D.

      None of the above.

    Correct Answer
    D. None of the above.
    Explanation
    When you use a credit card, you are not withdrawing money from savings or borrowing money from checking. Instead, the bank is essentially loaning you money to make the purchase. However, it is important to note that you are not directly borrowing from your bank account, but rather from a line of credit provided by the credit card issuer. Therefore, the correct answer is "None of the above."

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  • 22. 

    Which of the following statements are true?

    • A.

      A credit card is required if you want to establish credit.

    • B.

      All bank credit cards are the same.

    • C.

      Credit cards are a privilege.

    • D.

      You pay a fee every time you use a credit card.

    Correct Answer
    C. Credit cards are a privilege.
    Explanation
    The statement "Credit cards are a privilege" is true because having a credit card is not a necessity, but rather a privilege that is granted to individuals who meet certain criteria set by the credit card issuer. It is not a right or something that everyone is entitled to.

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  • 23. 

    When you have a credit card...

    • A.

      You can buy what you want, as long as you can afford the card's minimum monthly payment.

    • B.

      You will have a better credit score than if you do not have a credit card.

    • C.

      You cannot charge over your credit limit.

    • D.

      None of the above.

    Correct Answer
    D. None of the above.
    Explanation
    The correct answer is "None of the above" because none of the statements provided are accurate. Having a credit card does not mean you can buy whatever you want as long as you can afford the minimum monthly payment. It is important to manage your credit card spending responsibly and stay within your budget. Additionally, having a credit card does not automatically guarantee a better credit score. Your credit score is influenced by various factors, including your payment history, credit utilization, and length of credit history. Finally, it is possible to charge over your credit limit, but it may result in penalties or fees.

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Quiz Review Timeline +

Our quizzes are rigorously reviewed, monitored and continuously updated by our expert board to maintain accuracy, relevance, and timeliness.

  • Current Version
  • Mar 22, 2023
    Quiz Edited by
    ProProfs Editorial Team
  • Oct 19, 2014
    Quiz Created by
    Phbhenry
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