Mastering Consumer Credit

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Questions and Answers

Which type of credit allows you to borrow funds over and over again, up to a certain limit?

Open-end credit (correct)
Credit cards
Closed-end credit
Auto loans

What is the main characteristic of closed-end credit?

It has an approved maximum amount
It requires paying the full amount due every month
It can be used repeatedly for purchases
It is a one-time loan that is paid back over time (correct)

Which type of credit is a home equity line of credit (HELOC) an example of?

Closed-end credit
Auto loans
Credit cards
Open-end credit (correct)

Which one of these is an example of revolving credit?

Credit card (B) Signup and view all the answers

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

Credit cards allow you to borrow money to be repaid later, while debit cards take money directly out of your bank account (A) Signup and view all the answers

What is the purpose of a Schumer Box?

To help consumers understand and compare credit card fees and rates (B) Signup and view all the answers

What does the Annual Percentage Rate (APR) represent in a credit card?

The interest rate you pay on financed purchases (A) Signup and view all the answers

Flashcards

Open-end credit

Allows repeated borrowing up to a limit.

Closed-end credit

A one-time loan repaid over time.

HELOC

An example of open-end credit.

Credit card

A classic example of revolving, open-end credit.

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Credit card vs. Debit card

Credit cards borrow money; debit cards use your own.

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Schumer Box Purpose

Standardized credit card fee and rate disclosure.

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APR meaning

The interest rate on outstanding balances.

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Study Notes

Types of Credit

Revolving credit allows borrowing funds repeatedly up to a certain limit.
Closed-end credit has a fixed loan amount and repayment period.

Home Equity Line of Credit (HELOC)

A HELOC is an example of revolving credit.

Credit Cards vs. Debit Cards

Credit cards allow borrowing money from the issuer to make purchases.
Debit cards use the cardholder's own money for transactions.

Credit Card Disclosures

A Schumer Box is a table on credit card agreements that summarizes key terms.
The Annual Percentage Rate (APR) represents the total cost of borrowing, including interest and fees, over a year.