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Credit and Debt Management Flashcards

7 cards from real AFC practice questions. Tap to flip, then mark Knew It or Still Learning — missed cards come back until you master them.

Read the first 7 Credit and Debt Management flashcards as text

  1. A client's credit card balance is $8,000 at 22% APR. If they pay only the minimum payment of $160/month, approximately how long will it take to pay off the balance?

    Answer: Over 10 years

    At high interest rates with minimum payments, payoff timelines extend dramatically — a $8,000 balance at 22% APR with minimum payments typically takes well over 10 years.

  2. Which debt repayment strategy prioritizes paying off the highest interest rate debt first, regardless of balance size?

    Answer: Debt avalanche

    The debt avalanche method targets the highest-interest debt first, minimizing total interest paid over time.

  3. Under the Fair Debt Collection Practices Act (FDCPA), which action is a debt collector PROHIBITED from taking?

    Answer: Calling before 8 a.m. or after 9 p.m. in the consumer's time zone

    The FDCPA prohibits debt collectors from contacting consumers before 8 a.m. or after 9 p.m. local time.

  4. A client has a 'charge-off' listed on their credit report. What does this mean?

    Answer: The creditor has written the debt off as a loss but the client still owes the balance

    A charge-off means the original creditor wrote the debt off as a loss for accounting purposes, but the consumer still legally owes the balance.

  5. What is the statute of limitations on debt most directly relevant to?

    Answer: The time period during which a creditor can sue to collect a debt

    The statute of limitations governs the window of time during which a creditor or collector can file a lawsuit to collect a debt.

  6. A client receives a 1099-C form from a creditor. What does this indicate?

    Answer: Cancellation of debt income that may be taxable

    A 1099-C is issued when a creditor cancels $600 or more of debt, which the IRS may treat as taxable income for the debtor.

  7. Which factor most accurately describes the difference between a secured and an unsecured debt?

    Answer: Secured debts are backed by collateral, while unsecured debts are not

    Secured debts are tied to a specific asset (collateral) the lender can repossess if the borrower defaults; unsecured debts have no such backing.