Debit Cards vs. Establishing Credit Quiz

What does 'Character' refer to in the 6 C's of Credit?

Which factor of the 6 C's of Credit emphasizes the ability of the debtor to earn enough to repay the credit?

What does 'Condition' focus on in terms of extending credit?

What could allow a debtor to still be extended credit even if they lack enough capital?

In the context of granting credit, what should be scrutinized to determine if a debtor has the required characteristics?

What is the main difference between debit cards and credit cards?

Why is it important for individuals to establish a positive credit history?

What does a credit rating evaluate?

Why should individuals carefully manage their checking account according to the text?

How can individuals demonstrate financial responsibility when applying for a store or gas station credit card?

Debit Cards

Debit cards are plastic cards with electronic information that allow you to take money out against your checking account.
When you swipe your debit card, the money is taken immediately from your checking account.

Establishing Credit

4 steps to building a sound financial reputation:
- Start with a job to show that you can earn money.
- Open a savings account and save regularly to show financial responsibility.
- Open a checking account and manage it carefully to show experience with handling money.
- Apply for a store or gas station credit card, make small purchases, and pay your bill.

Importance of Credit Evaluation

Protects companies from risks of financial loss, fraud, or bad business decisions.
Important to build a positive credit history for future reference.
Allows lenders or creditors to assess the ability and willingness of borrowers to return money or pay for goods and services over an extended period.

Credit Rating

Credit rating is a creditor’s evaluation of a person’s willingness and ability to pay debts.
Credit report is a history or record of a person’s financial and credit practices.
Credit score is a numerical expression of a person’s credit worthiness based on their credit report.

Basis of Credit

The 6 C’s of Credit:
- Character: inherent traits and personal character of the debtor.
- Capital: property the debtor owns, including movable and immovable assets.
- Capacity: ability of the debtor to earn enough to repay the credit obtained.
- Condition: debtor’s personal ability to pay, or that of his business, in the face of existing economic, financial, and political situation.

Test your knowledge on the differences between debit cards and credit cards, as well as the steps to establishing a sound financial reputation, including earning money, saving regularly, and showing financial responsibility.