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WISE CERTIFICATION STUDY GUIDE
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WISE CERTIFICATION STUDY GUIDE
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WISE CERTIFICATION STUDY GUIDEpay yourself first - Answer- automatically route money from paycheck to savings (before
paying bills)
CD: What is it and what happens if you cash it before maturity? - Answer- it is a time deposit offered at financial institutions - penalty if cashed before maturity
Institutions that give loans - Answer- banks, credit unions, pawnshops, finance companies, payday lenders, tax preparers
Which institution(s) charge the highest interest rates on loans - Answer- pawnshops, payday lenders, tax refund lenders, finance companies
What is a credit union and the advantage of using a credit union: - Answer- member owned co-operative financial institution - advantage is lower interest rates on loans
Overdraft protection (opt in regulation) and how it works: - Answer- Overdraft protection is a feature offered by banks to keep your checking account from overdrafting when you
write a check or swipe your debit card but don't have enough money in your account. It is a loan that is paid back.
Compound Interest: - Answer- interest added to principal - interest earned on interest
Time value of money: - Answer- is calculated by value of money with a given amount of interest earned over a period of time; the longer the time you keep your money invested, the more interest you will earn. FUTURE!!!!
Liquid financial products vs. products that are less liquid: - Answer- savings and checking accounts are most liquid, certificate of deposit and money market accounts are less liquid
rule of 72 - Answer- -how long (many years) will it take to double an investment
-you can calculate how long it will take your money to double at a given interest rate, if you reinvest the earnings
72 / the Percentage Rate of Return= The Number of Years Needed to Double Your Money
-can also be used to calculate what interest rate you would need to receive in order for your investment to double in a specified period of time.
72 / the Number of Years= The Percentage Rate of Return Needed to Double Your Money Reconciling a Checking account-- why and when: - Answer- to view what activity has occurred in your account. Keep current with your check register to know what your current balance is at all times. When you receive your bank statement, you reconcile your check register against the statement to be sure no errors have been made and to record any bank fees and/or interest earned in your register (checks ans balances)
Repayment of student loans: - Answer- 6 month grace period (after leaving school) before you start making payments.
Tax anticipation loans: - Answer- A refund anticipation loan (RAL) is a short-term consumer loan secured by a taxpayer's expected tax refund
Advantages of a savings account: - Answer- liquid, compounding interest
credit: - Answer- buy now, pay later
Credit card cash advances: - Answer- provided by credit card companies - withdraw cash with credit card - you pay a higher interest rate
Truth in Lending Act: - Answer- Also called the Consumer Credit Protection Act, legislation enacted in 1968 requiring money lenders to be explicit about the true costs of
credit transactions. The Truth-in-Lending Act also outlaws the use of threatened or actual violence to collect debts
Consequence of paying the minimum payment due on a credit card bill or paying a bill late: - Answer- impacts credit score if paid late
If you are only paying minimum payment each month - Answer- you will take a much longer time to pay off balance - you will greatly increase the total amount paid back due to APR (Annual Percentage Rate) charged per month.
APR (Annual Percentage Rate): - Answer- the cost of borrowing money
How does the degree of risk influence the interest rate charged for credit: - Answer- if you have a low credit score, it demonstrates you are a poor credit risk, and you will pay a much higher interest rate on loans
Debt to Credit Ratio: - Answer- -A credit-to-debt ratio is the amount of available credit you have relative to the amount of debt you carry.
-Available credit - EX limit $50,000 but only charged $5,000 - can still borrow $45,000 if needed
Credit Reports: - Answer- is a number representing the creditworthiness of a person, and the likelihood that person will pay his or her debts. Lenders, such as banks and credit card companies, use credit scores to evaluate the potential risk posed by lending money to consumers.
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