Podcast
Questions and Answers
What is something that credit card commercials don't show you?
What is something that credit card commercials don't show you?
People making payments for months or years on those purchases.
A home equity line of credit (HELOC) can only be used for home repairs and renovations.
A home equity line of credit (HELOC) can only be used for home repairs and renovations.
False (B)
What do banks and lenders use credit scores to determine?
What do banks and lenders use credit scores to determine?
The likelihood that someone will repay debt.
Making purchases with a credit card means that you're borrowing money with interest, and __________ pay much higher interest rates.
Making purchases with a credit card means that you're borrowing money with interest, and __________ pay much higher interest rates.
When you finance a new car, you will end up paying more than the sticker price.
When you finance a new car, you will end up paying more than the sticker price.
The majority of Americans live paycheck to paycheck.
The majority of Americans live paycheck to paycheck.
Your greatest tool to building wealth is __________.
Your greatest tool to building wealth is __________.
_____________ require the borrower to put up collateral for the loan.
_____________ require the borrower to put up collateral for the loan.
What is part of the formula that determines a person's FICO score?
What is part of the formula that determines a person's FICO score?
You cannot rent a car or book a hotel room without a credit card.
You cannot rent a car or book a hotel room without a credit card.
Leasing a car is a method of financing where someone __________________.
Leasing a car is a method of financing where someone __________________.
What is The Second Foundation?
What is The Second Foundation?
Credit card companies make the most profit from _______________.
Credit card companies make the most profit from _______________.
Which is an example of an appreciating asset?
Which is an example of an appreciating asset?
Once you turn 18, you should regularly check your credit report for...
Once you turn 18, you should regularly check your credit report for...
Credit cards that offer flashy rewards like airline miles often...
Credit cards that offer flashy rewards like airline miles often...
Car lease agreements come with a stipulation that you must pay a penalty if you __________.
Car lease agreements come with a stipulation that you must pay a penalty if you __________.
The debt snowball method involves...
The debt snowball method involves...
Loans that directly help you advance in life, such as student loans, are acceptable debts.
Loans that directly help you advance in life, such as student loans, are acceptable debts.
Predatory lenders get their negative reputation from...
Predatory lenders get their negative reputation from...
A credit score is an indicator of how well someone pays off their debt, not how well they handle money.
A credit score is an indicator of how well someone pays off their debt, not how well they handle money.
When you buy with credit, you typically spend more than you would with cash or a debit card.
When you buy with credit, you typically spend more than you would with cash or a debit card.
The smartest way to buy a car is to ______________.
The smartest way to buy a car is to ______________.
What is the best way to avoid falling into debt?
What is the best way to avoid falling into debt?
Credit isn't a wealth-building tool, it's a business that makes money for...
Credit isn't a wealth-building tool, it's a business that makes money for...
A car is a depreciating asset.
A car is a depreciating asset.
When looking over your credit report, it's important to make sure...
When looking over your credit report, it's important to make sure...
Credit card companies charge stores a 2-3% fee for every purchase made with credit cards. This is called a(n)...
Credit card companies charge stores a 2-3% fee for every purchase made with credit cards. This is called a(n)...
The _______________ is the total amount of the car loan, plus taxes and fees.
The _______________ is the total amount of the car loan, plus taxes and fees.
How you spend and give your money...
How you spend and give your money...
What are marketing tactics used by the credit industry to trick people into debt?
What are marketing tactics used by the credit industry to trick people into debt?
What is the debt snowball method?
What is the debt snowball method?
What is the danger of putting collateral up?
What is the danger of putting collateral up?
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Study Notes
Credit and Debt Concepts
- Credit card payments can extend for months or years, leading to long-term debt.
- Home equity line of credit (HELOC) provides flexibility beyond home repairs.
- Credit scores assess the likelihood of debt repayment, influencing loans and credit offered.
- Young individuals often face higher interest rates when using credit cards.
- Financing a car generally results in paying more than its initial sticker price.
Financial Realities
- A significant number of Americans live paycheck to paycheck, indicating financial instability.
- Income is a fundamental asset in building wealth; it is more critical than credit.
- Secured loans involve collateral, minimizing lender risk and requiring borrowers to risk their assets.
Understanding Credit Scores
- FICO scores are determined by payment history, which impacts loan availability and conditions.
- Regular credit report checks are essential for detecting errors or fraudulent activity.
Consumer Behavior and Debt Management
- Leasing a car entails monthly payments without ownership, differing from buying.
- The Second Foundation encourages a debt-free lifestyle.
- Credit cards offering rewards often come with high annual fees that can negate benefits.
- Exceeding the mileage limit in a car lease incurs penalties.
Debt Strategies
- The debt snowball method advocates paying off debts starting from the smallest to the largest.
- Acceptable debts may include student loans, but they should still be managed carefully.
- Predatory lending practices include targeting vulnerable individuals and imposing exorbitant fees.
Financial Literacy and Spending Habits
- A credit score reflects debt repayment behavior, not overall financial management skills.
- Consumers often spend more when using credit compared to cash or debit cards.
- Cash purchases offer a more responsible financial approach, helping to avoid debt.
Credit Industry Practices
- Credit card companies generate profits by charging interest, particularly from individuals who carry balances.
- Knowing personal values is crucial as they influence spending and financial decisions.
- Marketing tactics in the credit industry often deceive consumers into accruing debt through low introductory rates and enticing rewards.
Risks and Responsibilities in Borrowing
- Collateral loans pose a risk of losing the pledged asset if repayment fails.
- Understanding principal amounts includes loan totals plus associated taxes and fees.
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