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Consumer Credit
Topic: Use of credit (AT 01-03)
1) Which situation is an example of a credit sale?
(A) buying a bicycle using a debit card
(B) exchanging a faulty television for another one
(C) leasing a computer for two years
(D) paying for furniture with a deposit and instalments
MJ/18/12/Q8
2) How does buying on credit contribute to a country’s standard of living?
(A) Consumers are able to buy what they want or need.
(B) Many people accumulate large amounts of debt.
(C) More goods will be imported for sale.
(D) People will save less of their income.
ON/17/12/Q7
3) The diagram shows a card allowing a retailer to buy goods at a warehouse.

YY & Co Ltd.
CASH AND CARRY WAREHOUSE
........ Mrs Asifa Masood..........
Is authorised to buy goods
at this warehouse

What advantage does Mrs Masood gain from buying goods at this warehouse?
(A) delivery costs paid by the wholesaler
(B) immediate availability of goods
(C) instant access to credit
(D) no need to visit the wholesaler
ON/17/12/Q28
4) What is an advantage to the purchaser of buying a product on credit?
(A) Credit checks may be made on the buyer.
(B) Interest may be charged by the seller.
(C) Payment is postponed until a later date.
(D) The buyer may have increased debts.
ON/19/11/Q8

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5) What is an advantage to a consumer of buying goods on credit?

(A) Goods may be returned by a customer who defaults on payment.
(B) It enables consumers to inspect goods before purchase.
(C) Payment for the goods can be made over a period of time.
(D) The retailer’s profit may increase as customers pay interest.
ON/19/12/Q7
6) What is a disadvantage to a buyer of using credit?
(A) Consumers may default on their payments.
(B) Consumers can spread their payments.
(C) It encourages overspending.
(D) It helps to meet emergencies.
MJ/19/13/Q7
7) Ahmed has seen an advertisement for a computer. It includes the words ‘credit terms available’.
Which statement explains why he is interested in buying the computer shown in the
advertisement?
(A) Cash vouchers will be offered to him.
(B) His money will be refunded if he finds he cannot use the computer.
(C) Payment for the computer can be spread over time.
(D) The price will be reduced if he pays cash when he buys the computer.
MJ/14/12/Q6
8) Which document is used to request payment from customers who buy on credit?
(A) advice note
(B) credit note
(C) quotation
(D) statement of account
MJ/14/12/Q14
9) Which question is most important for a customer considering buying goods on credit?
(A) Are the goods fit for the purpose?
(B) Do the goods represent value for money?
(C) What discount will be given by the retailer?
(D) What is the difference between the cash price and the credit price?
MJ/15/12/Q7
10) What is a disadvantage to the buyer of buying a television on credit?
(A) A credit check will be made by the seller.

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(B) Interest may be charged by the seller.

(C) Payment is postponed until a later date.
(D) There is no need to carry a large amount of cash when buying.
MJ/16/13/Q7
11) What is an advantage to a buyer of purchasing on credit?
(A) Credit agreements are easy to understand.
(B) Credit is available to anyone.
(C) Discounts are usually available.
(D) Payment is postponed until a later date.
MJ/20/12/Q7
12) What is an advantage to a business of selling on credit?
(A) Capital in the business may have to be increased.
(B) Less paperwork is required.
(C) Payment by the buyer is guaranteed.
(D) Sale of stock may increase.
MJ/19/12/Q9
Assignments
1) Jane is a schoolteacher with a regular income. She wishes to buy a car from a garage and
requires credit because she has only a 25% deposit.
(a) (i) What is meant by credit? [1]
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(ii) Describe two advantages to Jane of buying on credit.
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(iii) Outline two ways in which selling the car on credit will not benefit the garage.
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MJ/17/23/Q1
2) Fig. 2 shows documents used in a commercial transaction between Faria, a retailer and Kumal,
a wholesaler.

Fig. 2
Use Fig. 2 to help you to answer the following questions.
Transactions between wholesalers and retailers are usually based on credit terms. Explain why
placing an order on credit terms is important to Faria. [4]
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(ii) Describe two disadvantages to wholesaler of selling on credit.
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Topic: Types of credit (AT 01-05)

1) Many people obtain credit from their local shops.
What is this called?
(A) cash discount
(B) lay-by
(C) leasing
(D) overdraft
2) A method of credit in which a shopkeeper keeps goods ordered for collection at the end of the
week is known as
(A) credit sales.
(B) credit transfer.
(C) deferred credit.
(D) lay-by.
ON/16/12/Q9
3) Suleiman has received his credit card statement which contains the following information.
Statement date 1 October 2016
Opening balance $2000
Debits $750
Credits $500
New balance $2250
Credit limit $5000
Minimum payment $85
Payment to be credited by 21 October 2016
What is the best way for Suleiman to avoid paying any interest on his credit card?
(A) pay $750 after 21 October
(B) pay $2000 before 21 October
(C) pay $2250 after 21 October
(D) pay $2250 before 21 October
ON/16/12/Q10

4) This label was displayed on a tablet computer in a store.

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Cash Price: $450

Hire Purchase Price:
Deposit $200 and 12 monthly installments of $25

How much more would the tablet computer cost if it was bought on hire purchase?
(A) $25 (B) $50 (C) $300 (D) $500
MJ/19/12/Q10
5) Informal credit is most likely to be offered to customers of
(A) department stores.
(B) hypermarkets.
(C) independent retailers.
(D) multiple shops.
ON/17/11/Q9
6) The advertisement shown is for a plastic card.

THE INDEPENDENT CITY CARD

Your free pass to the best discounts and deals in over
100 independent businesses in the city
GET YOURS TODAY

What type of card is being advertised?

(A) credit card
(B) debit card
(C) loyalty card
(D) store card
ON/17/12/Q6
7) Which statement about credit cards is not correct?
(A) A credit card allows you to spend up to the credit limit on your account.
(B) APR is the annual rate of interest charged on a credit card.
(C) Balance transfers from another credit card company are free of interest.
(D) The 16 digits shown on the front of the credit card is your account number.
ON/17/12/Q33
8) The document is a customer’s copy of a bill for a credit card purchase.

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Who is the customer?

(A) 000444
(B) Diamondcard
(C) C Krazy Days
(D) Sally Lee
MJ/13/12/Q9
9) Mrs Khan has a credit card. Her statement for April is shown below.
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1 April opening balance 500
12 April purchase 120
20 April payment 250
30 April interest charge 40
What is the opening balance on 1 May?
(A) $290 (B) $370 (C) $410 (D) $910
MJ/14/12/Q7
10) To avoid paying interest, credit card holders should pay for their goods
(A) at the time of purchase.

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(B) before a date given on the monthly statement.

(C) two months after the purchase date.
(D) when their goods arrive.
MJ/14/13/Q8
11) Jenni has decided to pay for her holiday air flight tickets by using her credit card.
What is the advantage of paying by credit card?
(A) Commission is charged on the transaction.
(B) Interest will be charged.
(C) Payment can be postponed until the end of the month.
(D) Payment is made directly from her bank account.
MJ/15/12/Q32
12) A retailer who allows informal credit would usually expect payment
(A) at the end of the week.
(B) immediately.
(C) in a year’s time.
(D) when the customer has the money.
MJ/16/12/Q8
13) Susan buys a jacket using a credit sales agreement. The cash price is $290.
Susan pays $50 deposit and the rest of the debt, on which 10% interest is charged, in 12 equal
monthly instalments.
What will be the total credit sales price?
(A) $266 (B) $290 (C) $314 (D) $340
MJ/16/12/Q9
14) What is an advantage to a department store of offering a store card?
(A) It increases the amount of cash kept on the premises.
(B) It increases the amount of records to be kept.
(C) It increases the number of bad debts.
(D) It increases the turnover of the business.
MJ/17/12/Q8
15) Shanshan wishes to buy a bedroom suite that is on offer for $1800. If she pays cash, a discount
of 20% will be given. If she buys on hire purchase terms, a 5% deposit is required plus 10 equal
instalments of $200.
How much more will Shanshan pay if she buys on hire purchase rather than paying cash?
(A) $290 (B) $650 (C) $1440 (D) $2090

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MJ/17/12/Q9
16) A computer is offered for sale by cash or by hire purchase on the following terms.
Cash price $400
Hire purchase with a deposit of $50 and 24 monthly instalments of $20 each
How much more will the customer pay if she buys the computer using hire purchase?
(A) $130 (B) $400 (C) $480 (D) $530
MJ/17/13/Q9
17) This price tag was attached to a smart TV in a store.

Cash Price $900

Hire Purchase Price
Deposit $400
12 monthly instalments of $50

How much more would the TV cost if it was bought on hire purchase?
(A) $50 (B) $100 (C) $600 (D) $1000
MJ/20/12/Q8
18) Susan buys a jacket using a credit sales agreement. The cash price is $290.
Susan pays $50 deposit and the rest of the debt, on which 10% interest is charged, in 12 equal
monthly instalments.
What will be the total credit sales price?
(A) $266 (B) $290 (C) $314 (D) $340
ON/13/11/Q8
Assignments
1) Lucy and Imran own a fashion boutique as a partnership.
(d) Lucy and Imran are considering:
• introducing a store card for customers
• offering informal credit to customers
• providing loyalty cards for customers.
Would these benefit the business? Give reasons for your answer.
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ON/13/21/Q4
2) Patrick is a freight forwarder. He is involved in international air transport and uses a smartphone
for his work.
(b) State two circumstances in which Patrick would use a credit card for his own personal use.
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3) Banks provide a number of services to their customers.
Discuss whether it is better for a customer to pay for an expensive TV with a debit card or a
credit card. Give reasons for your answer.
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4) A retailer sells many types of computer.
She will accept both debit cards and credit cards as means of payment. She will not accept
cheques.

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The retailer also offers two payment plans:

• PLAN A price reduction of 10% for a cash payment
• PLAN B extended credit (deferred payments) of $30 a month spread over two years.
(b) A customer wishes to purchase a computer priced at $600. Calculate the total purchase
price for the computer using Plan B. Show your working.
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(c) The retailer accepts debit and credit cards and offers two payment plans. Is the retailer
sensible to offer all these options for making payment? Give reasons for your answer.
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Topic: Suitability of different types of credit (AT 01)

1) A student wishes to buy a laptop to aid his studies.

Which factor would be the most important for him to consider when deciding which type of
credit to use?
(A) immediate ownership
(B) length of repayment period
(C) number of instalments
(D) overall total cost
MJ/18/13/Q8
2) A factory owner needs an expensive piece of machinery.
How can the factory owner obtain the machinery without buying on credit?
(A) hire purchase
(B) leasing
(C) overdraft
(D) trade credit

3) Which source of finance is the most appropriate for a company that wishes to replace its
vehicles every two years?
(A) hire purchase
(B) leasing
(C) mortgage
(D) overdraft
ON/17/11/Q37
4) Which type of credit allows the purchaser to become the legal owner of the goods on payment
of the first instalment?
(A) deferred payments
(B) hire purchase
(C) leasing
(D) mortgage
ON/19/12/Q8
5) Mrs Wang’s computer needs urgent repairs so that she can answer her emails. She has no
money until she receives her salary next month.
What is the best way to pay for these repairs to her computer?

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(A) bank loan

(B) credit card
(C) debit card
(D) hire purchase
MJ/18/12/Q9
6) Mr Lee has seen a second-hand van he wishes to buy costing $8000. He has enough money for
the deposit.
What is the best type of credit to use to pay the balance?
(A) credit card
(B) deferred payment
(C) hire purchase
(D) overdraft
MJ/19/13/Q8
Assignments

5) Fig. 3.1 shows types of credit used by consumers in 2019.

Fig. 3.1 Types of credit used by consumers in 2019

Use Fig. 3.1 to help you answer the following questions.
(a) (i) Calculate the total percentage of credit for store cards and hire purchase in 2019. Show
your working.
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(ii) Calculate the amount of credit for credit cards in 2019. Show your working.
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(b) Explain one reason why many consumers prefer not to use informal credit.
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(c) A consumer wants to buy a car. She is considering using a credit card or a bank loan to pay
for the car. Discuss both options. Which would you recommend? Give reasons for your answer.
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[Total: 14]
MJ/20/22/Q3
6) AAA is a large chain of department stores. It has branches in cities all over the country.
(c) Mr Yip has to decide how to finance the purchase of the washing machine. He could use his
AAA store card or hire purchase.
Discuss whether or not he should use his store card or hire purchase. Recommend which
finance option he should use. Give reasons for your answer.
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ON/16/21/Q5

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