Questions and Answers
What is the most aggressively marketed product?
Debt
How much do Visa, Mastercard, Discover, and American Express spend over a year on marketing?
4
There were no credit cards prior to which year?
1958
What is the term for money owed to another person or company?
Signup and view all the answers
Myth: You need a student _________ to go to college.
Signup and view all the answers
What is the truth about going to college?
Signup and view all the answers
What should you choose when selecting a school?
Signup and view all the answers
What is credit that automatically renews whenever a payment is made to reduce the debt?
Signup and view all the answers
What is something owned that is offered as security on a debt?
Signup and view all the answers
What is a legal claim against an asset until the debt is repaid?
Signup and view all the answers
What type of asset increases in value over time?
Signup and view all the answers
What is the difference between the amount owed on a home and what it could be sold for?
Signup and view all the answers
What is the failure to repay a loan on time called?
Signup and view all the answers
What type of loan is paid back in monthly installments?
Signup and view all the answers
What type of asset loses value over time?
Signup and view all the answers
What term describes a lender who employs deceptive or unfair practices?
Signup and view all the answers
Myth: I need to have a -------- score.
Signup and view all the answers
Truth: A credit score is an 'I ----- debt' score.
Signup and view all the answers
A FICO score is not an indicator that you are ------- with money.
Signup and view all the answers
What is your most powerful wealth-building tool?
Signup and view all the answers
You ----- rent an apartment without a FICO score.
Signup and view all the answers
Without a FICO score, an extra ------ may be required.
Signup and view all the answers
What is a statistical number that represents a consumer's creditworthiness?
Signup and view all the answers
What is a company that collects credit rating information?
Signup and view all the answers
Myth: I need a ------- card to rent a car and make purchases online.
Signup and view all the answers
Truth: You can do both of these things with a ------ card.
Signup and view all the answers
What type of fee do most credit cards charge?
Signup and view all the answers
What is the average credit card debt for college students?
Signup and view all the answers
Myth: Car --------- are a way of life.
Signup and view all the answers
Truth: Avoid car ---- now and always.
Signup and view all the answers
What is the average new car payment in America?
Signup and view all the answers
What is the original amount of a loan referred to as?
Signup and view all the answers
What is the additional cost a lender charges for borrowing their money?
Signup and view all the answers
What is the amount of time you will be making payments on a loan?
Signup and view all the answers
What is the loss of value of an asset over time called?
Signup and view all the answers
What is it called when the value of an asset falls below what is owed on it?
Signup and view all the answers
Take ---- off the table.
Signup and view all the answers
Pay off all debt using the
Signup and view all the answers
Paying off debt is not a math problem—it is a -------- problem.
Signup and view all the answers
This is not a theory. It is a ------ process.
Signup and view all the answers
Study Notes
Debt and Credit Overview
- Debt is the most aggressively marketed financial product in history.
- Major credit card companies such as Visa, Mastercard, Discover, and American Express spend over 4 billion dollars annually on marketing.
- The first credit cards were introduced in 1958.
Key Definitions
- Debt: The amount of money owed to another person or company.
- Revolving Credit: A type of credit that automatically renews as payments are made, reducing the outstanding debt.
- Collateral: Valuable assets offered as security for a loan, which can be forfeited if the debt is unpaid.
- Lien: A legal claim against an asset until the associated debt is repaid.
Asset Types
- Appreciating Asset: An asset that increases in value over time.
- Equity: The increase in home value over time, representing the difference between the amount owed and the potential sale price.
- Depreciating Asset: An asset that decreases in value over time, like a car.
Credit and Lending Myths
-
Myth: A student loan is necessary for college attendance.
- Truth: College can be attended debt-free by choosing affordable institutions.
-
Myth: A high FICO score is needed for financial success.
- Truth: A credit score reflects one's debt status, not overall financial health.
Financial Tools and Responsibilities
- Your income is identified as the most powerful tool for building wealth.
- A FICO score is not required to rent an apartment, though additional deposits may be needed without it.
- Credit Score: A numerical representation of a consumer's creditworthiness, typically managed by a Credit Bureau.
Credit Card Insights
- Many people believe a credit card is necessary for online purchases and car rentals.
- Truth: Debit cards can also be utilized for these transactions.
- The average college student's credit card debt stands at approximately $1,400.
- Annual fees are commonly charged by credit card companies.
Debt Management Strategies
- The average car payment in America is around $554 per month.
- Principal: The initial sum of a loan before interest is added.
- Interest: The extra cost charged by lenders for borrowing funds.
- Term: The duration, in months, over which loan payments are made.
Behavioral Approaches to Debt
- Paying off debt is primarily a behavioral challenge, not just a mathematical issue.
- Use the "debt snowball" method to systematically eliminate debts.
- Adopting a zero-debt lifestyle is encouraged as a sustainable financial practice.
Studying That Suits You
Use AI to generate personalized quizzes and flashcards to suit your learning preferences.
Description
Test your knowledge of key concepts in finance with these Chapter 4 review flashcards. This quiz covers important terms and facts related to debt and credit cards. Challenge yourself and enhance your understanding of financial products and marketing strategies.
