TEST BANK PERSONAL FINANCE 12TH EDITION GARMAN

TEST BANK PERSONAL FINANCE 12TH EDITION GARMAN

1. The cost of credit on a yearly basis as a percentage rate is called the APR.
a. True
b. False
ANSWER: True
POINTS: 1
DIFFICULTY: Easy
REFERENCES: Compare the common types of consumer credit, including credit cards and installment credit
KEYWORDS: Bloom’s: Remembering
OTHER: Analytic
NOTES: 7.1

2. Installment credit is also called open-ended credit.
a. True
b. False
ANSWER: False
POINTS: 1
DIFFICULTY: Easy
REFERENCES: Compare the common types of consumer credit, including credit cards and installment credit
KEYWORDS: Bloom’s: Remembering
OTHER: Analytic
NOTES: 7.1
installment credit is also called closed-end credit.

3. With open-ended credit, credit is extended in advance of any transaction, and the borrower must reapply each time credit is desired.
a. True
b. False
ANSWER: False
POINTS: 1
DIFFICULTY: Moderate
REFERENCES: Compare the common types of consumer credit, including credit cards and installment credit
KEYWORDS: Bloom’s: Understanding
OTHER: Analytic
NOTES: 7.1
with open-ended credit the borrower can have access to credit as long as minimum payments are made and the total owed does not exceed the credit limit on the account.

4. Consumer credit is non-business debt used by consumers for expenditures including home mortgages.
a. True
b. False
ANSWER: False
POINTS: 1
DIFFICULTY: Easy
REFERENCES: Compare the common types of consumer credit, including credit cards and installment credit
KEYWORDS: Bloom’s: Understanding
OTHER: Analytic
NOTES: 7.1
mortgages are not included officially under the label of consumer credit.

5. For an open-ended credit account a credit limits is set by the lender and represents the maximum outstanding debt allowed on the account.
a. True
b. False
ANSWER: True
POINTS: 1
DIFFICULTY: Easy
REFERENCES: Compare the common types of consumer credit, including credit cards and installment credit
KEYWORDS: Bloom’s: Understanding
OTHER: Analytic
NOTES: 7.1

6. The credit limit on a credit card restricts the total cumulative amount of charges that can be made by the borrower over the borrower’s lifetime.
a. True
b. False
ANSWER: True
POINTS: 1
DIFFICULTY: Moderate
REFERENCES: Compare the common types of consumer credit, including credit cards and installment credit
KEYWORDS: Bloom’s: Understanding
OTHER: Analytic
NOTES: 7.1
the credit limit applies to the outstanding balance on the account at any point in time.

7. All types of open-ended credit accounts allow multiple uses without reapplication, but some require that the entire balance be repaid each month.
a. True
b. False
ANSWER: True
POINTS: 1
DIFFICULTY: Moderate
REFERENCES: Compare the common types of consumer credit, including credit cards and installment credit
KEYWORDS: Bloom’s: Understanding
OTHER: Analytic
NOTES: 7.1

8. The balance of travel and entertainment cards must be paid in 60 days.
a. True
b. False
ANSWER: False
POINTS: 1
DIFFICULTY: Easy
REFERENCES: Compare the common types of consumer credit, including credit cards and installment credit
KEYWORDS: Bloom’s: Remembering
OTHER: Analytic
NOTES: 7.1
the balance must be repaid each month.

9. A personal line of credit is a form of closed-end credit.
a. True
b. False
ANSWER: False
POINTS: 1
DIFFICULTY: Easy
REFERENCES: Compare the common types of consumer credit, including credit cards and installment credit
KEYWORDS: Bloom’s: Understanding
OTHER: Analytic
NOTES: 7.1
it is a form of open-ended credit

10. The entire balance charged on travel and entertainment cards must be repaid within 30 days.
a. True
b. False
ANSWER: True
POINTS: 1
DIFFICULTY: Easy
REFERENCES: Compare the common types of consumer credit, including credit cards and installment credit
KEYWORDS: Bloom’s: Remembering
OTHER: Analytic
NOTES: 7.1

11. Service credit is granted to consumers by public utilities, physicians, dentists, and other service providers that do not require full payment when services are rendered.
a. True
b. False
ANSWER: True
POINTS: 1
DIFFICULTY: Easy
REFERENCES: Compare the common types of consumer credit, including credit cards and installment credit
KEYWORDS: Bloom’s: Understanding
OTHER: Analytic
NOTES: 7.1

12. Service credit normally carries no interest.
a. True
b. False
ANSWER: True
POINTS: 1
DIFFICULTY: Easy
REFERENCES: Compare the common types of consumer credit, including credit cards and installment credit
KEYWORDS: Bloom’s:
OTHER: Analytic
NOTES: 7.1

13. The amount owed on a debt is the principal.
a. True
b. False
ANSWER: True
POINTS: 1
DIFFICULTY: Easy
REFERENCES: Describe the types and features of credit card accounts
KEYWORDS: Bloom’s: Remembering
OTHER: Analytic
NOTES: 7.2

14. A credit card holder is in default when he or she fails to meet any requirement of a credit agreement.
a. True
b. False
ANSWER: True
POINTS: 1
DIFFICULTY: Easy
REFERENCES: Describe the types and features of credit card accounts
KEYWORDS: Bloom’s: Understanding
OTHER: Analytic
NOTES: 7.2

15. A borrower who has failed to make a payment of principal or interest when due or meet any other requirement of a credit agreement is said to be in foreclosure.
a. True
b. False
ANSWER: False
POINTS: 1
DIFFICULTY: Easy
REFERENCES: Describe the types and features of credit card accounts
KEYWORDS: Bloom’s: Understanding
OTHER: Analytic
NOTES: 7.2
in such a situation the borrower is in default; foreclosure applies to mortgage loans in default.

16. A retail credit card allows a customer to make purchases on credit at any of the outlets of a particular retailer or retail chain.
a. True
b. False
ANSWER: True
POINTS: 1
DIFFICULTY: Easy
REFERENCES: Describe the types and features of credit card accounts
KEYWORDS: Bloom’s: Understanding
OTHER: Analytic
NOTES: 7.2

17. A bank credit card account is an open-ended account at a financial institution that allows the holder to make purchases almost anywhere.
a. True
b. False
ANSWER: True
POINTS: 1
DIFFICULTY: Easy
REFERENCES: Describe the types and features of credit card accounts
KEYWORDS: Bloom’s: Understanding
OTHER: Analytic
NOTES: 7.2

18. Visa and MasterCard are the most commonly recognized bank card names as well as the actual lenders.
a. True
b. False
ANSWER: False
POINTS: 1
DIFFICULTY: Easy
REFERENCES: Describe the types and features of credit card accounts
KEYWORDS: Bloom’s: Remembering
OTHER: Analytic
NOTES: 7.2
the actual lender is the particular depository institution than issues the card under the particular brand name.

19. Credit card issuers sometimes send convenience checks to customers in an effort to entice them to take out a costly cash advance.
a. True
b. False
ANSWER: True
POINTS: 1
DIFFICULTY: Moderate
REFERENCES: Describe the types and features of credit card accounts
KEYWORDS: Bloom’s: Understanding
OTHER: Analytic
NOTES: 7.2

20. Making a payment on one credit card with a cash advance from another is called a balance transfer.
a. True
b. False
ANSWER: True
POINTS: 1
DIFFICULTY: Moderate
KEYWORDS: Bloom’s: Remembering
OTHER: Analytic
NOTES: 7.2

21. Affinity cards are prestige bank cards with the logo of a sponsoring organization imprinted on the face of the card.
a. True
b. False
ANSWER: False
POINTS: 1
DIFFICULTY: Moderate
REFERENCES: Describe the types and features of credit card accounts
KEYWORDS: Bloom’s: Remembering
OTHER: Analytic
NOTES: 7.2
affinity cards are standard bank cards with the logo of a sponsoring organization imprinted on the face of the card.

22. Affinity cards are a source of revenue for the sponsoring organization.
a. True
b. False
ANSWER: True
POINTS: 1
DIFFICULTY: Easy
REFERENCES: Describe the types and features of credit card accounts
KEYWORDS: Bloom’s: Understanding
OTHER: Analytic
NOTES: 7.2

23. A retail credit card allows the holder to make purchases at numerous businesses.
a. True
b. False
ANSWER: False
POINTS: 1
DIFFICULTY: Easy
REFERENCES: Describe the types and features of credit card accounts
KEYWORDS: Bloom’s: Remembering
OTHER: Analytic
NOTES: 7.2
a retail credit card allows the holder to make purchases at any of the outlets of a particular retailer or retail chain.

24. The interest rates on cash advances using a credit card are usually higher than the rates for purchases.
a. True
b. False
ANSWER: True
POINTS: 1
DIFFICULTY: Moderate
REFERENCES: Describe the types and features of credit card accounts
KEYWORDS: Bloom’s: Remembering
OTHER: Analytic
NOTES: 7.2

25. Obtaining money via a credit card cash advance is a low-cost alternative if you need a loan.
a. True
b. False
ANSWER: False
POINTS: 1
DIFFICULTY: Moderate
REFERENCES: Describe the types and features of credit card accounts
KEYWORDS: Bloom’s: Understanding
OTHER: Analytic
NOTES: 7.2
the interest rates on cash advances are usually higher than the rates for purchases, and there is generally a transaction fee associated with the advance.

26. Introductory rates are also known as teaser rates.
a. True
b. False
ANSWER: True
POINTS: 1
DIFFICULTY: Easy
REFERENCES: Describe the types and features of credit card accounts
KEYWORDS: Bloom’s: Remembering
OTHER: Analytic
NOTES: 7.2

27. If you cut up your credit card, the account is effectively closed.
a. True
b. False
ANSWER: False
POINTS: 1
DIFFICULTY: Moderate
REFERENCES: Describe the types and features of credit card accounts
KEYWORDS: Bloom’s: Remembering
OTHER: Analytic
NOTES: 7.2
cutting up the cards has no effect. You must notify the lender of the desire to close the account.

28. New credit card accounts sometimes come with a low introductory rate for the first few months.
a. True
b. False
ANSWER: True
POINTS: 1
DIFFICULTY: Moderate
REFERENCES: Describe the types and features of credit card accounts
KEYWORDS: Bloom’s: Understanding
OTHER: Analytic
NOTES: 7.2

29. A penalty APR is a high interest rate that is assessed whenever a borrower fails to uphold certain rules of the account.
a. True
b. False
ANSWER: True
POINTS: 1
DIFFICULTY: Easy
REFERENCES: Describe the types and features of credit card accounts
KEYWORDS: Bloom’s: Remembering
OTHER: Analytic
NOTES: 7.2

30. A preapproved credit card offer means that you will be granted credit, but the credit card debt limit and APR will be determined after you apply for an account.
a. True
b. False
ANSWER: True
POINTS: 1
DIFFICULTY: Easy
REFERENCES: Describe the types and features of credit card accounts
KEYWORDS: Bloom’s: Understanding
OTHER: Analytic
NOTES: 7.2

31. The penalty APR is a measure of the number of credit card users that pay only the minimum each month.
a. True
b. False
ANSWER: False
POINTS: 1
DIFFICULTY: Moderate
REFERENCES: Describe the types and features of credit card accounts
KEYWORDS: Bloom’s: Remembering
OTHER: Analytic
NOTES: 7.2
a penalty APR is a new, and higher, interest rate assessed on a credit card account when the cardholder is in default or has otherwise violated a rule of the account.

32. The interest rate on variable-rate credit cards is usually tied to some form of prime interest rate.
a. True
b. False
ANSWER: True
POINTS: 1
DIFFICULTY: Moderate
REFERENCES: Describe the types and features of credit card accounts
KEYWORDS: Bloom’s: Understanding
OTHER: Analytic
NOTES: 7.2