Credit & Debt

Score: / 10

Circle the best answer for each question. Each question is worth 1 point.

Your statement balance is $320 and the minimum is $30. You pay $320 on time.
1. What interest do you owe on those purchases?
- A. About $6
- B. $0
- C. $30
- D. 22% of $320
You have two cards with $1,000 limits each. Your balances are $200 and $100.
2. What's your overall credit utilization?
- A. 15%
- B. 30%
- C. 10%
- D. 20%
3. Why can paying only the minimum on a credit card take years?
- A. Minimums are applied to next year's purchases.
- B. Much of each minimum payment goes to interest, so the balance drops slowly.
- C. Card companies are required to extend the loan.
- D. The credit limit keeps rising.
A dealer offers to lower your car payment by stretching the loan from 4 years to 7 years at the same APR.
4. What's the tradeoff?
- A. You'll pay more total interest, and owe money on the car for longer.
- B. There's no tradeoff — lower payments are always better.
- C. The APR automatically drops.
- D. You'll pay less in total.
5. A typical two-week payday loan fee of $15 per $100 borrowed works out to an APR of almost 400%.
True/False
An 18-year-old with no credit history wants to start building credit safely.
6. Which plan makes the most sense?
- A. Apply for several store cards at once to build history faster.
- B. Take out a personal loan for things they don't need.
- C. Get a secured or student card, use it lightly, and pay the full balance every month.
- D. Avoid all credit forever.
7. A co-signer is only responsible if the main borrower dies.
True/False
An ad offers a "free credit report" but asks for a credit card number to start a $1 trial membership.
8. What's the better choice?
- A. Sign up — $1 is cheap.
- B. Pay a credit repair company instead.
- C. Ask the lender to send it by mail for a fee.
- D. Use AnnualCreditReport.com, the official free source.
You owe $500 at 27% APR, $1,500 at 19% APR, and $3,000 at 8% APR.
9. With the avalanche method, which debt gets your extra payments first?
- A. The $3,000 debt, because it's largest
- B. The $500 debt at 27% APR
- C. The $1,500 debt, because it's in the middle
- D. All three equally
Two people buy the same $20,000 car with 5-year loans. One gets 7% APR; the other, with a lower credit score, gets 12%.
10. What does this show?
- A. Credit scores only matter for credit cards.
- B. A lower score can cost thousands of dollars more for the same purchase.
- C. Interest rates are the same for everyone.
- D. The higher rate lowers the monthly payment.

Answer key

Credit & Debt · Short version

1. B. $0 (Final review)Paying the full statement balance by the due date keeps you in the grace period — no interest on purchases.
2. A. 15% (Final review)$300 owed ÷ $2,000 total limit = 15%.
3. B. Much of each minimum payment goes to interest, so the balance drops slowly. (Final review)Minimums are small by design. When interest eats most of the payment, the balance barely moves.
4. A. You'll pay more total interest, and owe money on the car for longer. (Final review)Longer terms shrink the payment but increase total interest. Cars also lose value, so you may owe more than it's worth.
5. True (Final review)15% every two weeks × 26 periods a year ≈ 390%. That's according to the Consumer Financial Protection Bureau.
6. C. Get a secured or student card, use it lightly, and pay the full balance every month. (Final review)A small, well-managed card builds on-time payment history with low utilization — and no interest if paid in full.
7. False (Final review)A co-signer is fully responsible whenever the borrower doesn't pay, and missed payments hurt the co-signer's credit too.
8. D. Use AnnualCreditReport.com, the official free source. (Final review)AnnualCreditReport.com gives free reports from all three bureaus with no trial or card required. "Free" trials often turn into monthly charges.
9. B. The $500 debt at 27% APR (Final review)Avalanche targets the highest APR. Here that also happens to be the smallest balance, so avalanche and snowball agree.
10. B. A lower score can cost thousands of dollars more for the same purchase. (Final review)On these numbers, the 12% loan costs about $2,932 more in interest — for the same car.