The Ultimate Revolving Credit Quiz

The Ultimate Revolving Credit Quiz
Image: iStockphoto/MarcusPhoto1

About This Quiz

Revolving credit has its advantages and disadvantages: you can use the money to buy anything you'd like, but the temptation to over-spend can be difficult to resist. You can pay back the money at your convenience, but if get behind on your payments you can accrue massive debt.
When you revolve your credit you are doing which of these?
You are carrying a balance from month to month.
Revolving your credit means carrying a debt balance from month to month, usually for an undefined period of time.
You are using one credit account to pay off another.
You are increasing your credit limit from month to month.

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What is the range of interest that credit card companies usually charge?
3 - 5 percent
8 - 12 percent
10 - 28 percent
Once a balance carries over to the next month, the interest piles up quickly. Most companies charge between 10 and 28 percent interest.

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What was the approximate revolving credit debt of U.S. consumers in 2007?
$900 million
$900 billion
American consumers are crazy for credit. As of 2007 their total debt was over $900 billion dollars.
$900 trillion

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What percentage of credit card holders pay their credit card bills on time?
20 percent
30 percent
40 percent
Less than half of all credit card holders manage to pay their monthly balances on time -- 40 percent.

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What percentage of Americans carry a credit debt of over $9,000?
8 percent
A total of 8 percent of Americans carry more than $9,000 in debt. It can take decades to pay off that amount, if you only make minimum payments.
12 percent
15 percent

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What are the two basic types of credit?
open-end and closed-end
There are two basic types of loans: closed-end, which have to paid in full by a specific date, and open-end, which can carry over indefinitely.
prime and sub-prime
profit and non-profit

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Which of these statements best describes a closed-end loan?
You receive a lump sum of money, which you may pay back at any time.
You borrow a specific amount of money, at a specific interest rate, to be paid back at a specific time.
A closed-ended loan has a set amount, a set interest rate, and a set date by which it must be paid back. It does not carry over from month to month, and the lender may not change the conditions of the loan.
You get a credit card that has a cash limit.

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Which of these is an example of a closed-end loan?
a mortgage
Mortgages are the most common closed-end loans. You borrow a specific amount to pay for your house, and the payments you make are fixed until the loan has been repaid.
a credit card
a home equity credit line

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Why is a credit card considered a type of open-end loan?
You don't have a specific date by which you must repay the debt.
Open-end loans, such as credit cards, do not have to be paid back by a specific date, and the monthly payments are not fixed.
You never know how much you actually owe.
You can use it to pay off a different loan.

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The minimum amount you must pay on a credit card balance is usually around what percentage?
2 - 4 percent
Credit card companies do require that you pay back some of your balance each month. Usually that amount must cover 2 - 4 percent of your current balance.
5 - 10 percent
10 - 15 percent

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What percentage of Americans make only minimum payments on their monthly balance?
one in three
one in six
One in six Americans is making minimum payments on their credit cards. These balances can quickly grow to unattainable sums.
one in nine

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How do you calculate your home's equity?
Your home's equity is your home's current market value.
Subtract what you owe on the house from the value of the house.
Your home equity is the amount of money you would have left over if you sold your home and paid off your mortgage.
Divide what still owe on your home into 360 equal payments.

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What is the biggest advantage to a revolving credit loan?
You may use the money to purchase anything.
Unlike a closed-end loan, which you usually must use to pay for a specific thing -- a car, a house -- an open-end loan, such as a credit card, can be used to buy whatever you'd like.
You don't have to pay the money back.
You can decrease the interest on the loan whenever you'd like.

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What percentage of Americans have 10 credit cards or more?
5 percent
10 percent
As many as 10 percent of Americans have 10 or more different credit cards. That's how the debt really piles up.
15 percent

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One of the most problematic aspects of revolving credit is which of these fine-print conditions?
The lender has the right to change the conditions of the loan at any time.
Credit card companies retain the right to change the conditions of your loan at any time. You might receive a letter in the mail stating that your limit has been reduced by half!
The credit cards can get stolen.
The loan appears on your credit report.

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You Got:
/15
iStockphoto/MarcusPhoto1

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