What's covered
Key facts
Buy Now Pay Later and credit risk
A sensible rule before using BNPL is to check that the total fits the monthly budget.
Good debt vs bad debt
Affordability is the ability to repay a loan comfortably from regular income.
Loans, credit cards and overdrafts
Many credit cards charge an annual fee in return for rewards like cashback or air miles.
Managing financial risk
An emergency cost is a sudden bill that has not been planned for (e.g. boiler breakdown, car repair).
Recognising financial exploitation and scams
UK scam victims can report what happened to Report Fraud (formerly Action Fraud) and the police.
The cost of borrowing - interest and APR
APR stands for Annual Percentage Rate and shows the yearly cost of a loan as a percentage.
Why people borrow money
Borrowing lets a person make a big purchase before they have fully saved up for it.
Buy Now Pay Later and credit risk
Across many small BNPL plans, total debt can creep up without the shopper noticing.
Good debt vs bad debt
Asking "can the repayments fit the monthly budget?" is the key affordability question before taking on any debt.
Loans, credit cards and overdrafts
A credit card is a plastic payment card that lets a customer spend now and repay later.
Sample questions
A taste of the 75 questions in this topic, answers marked. Sign up to practise the full set with spaced repetition.
What payment service lets shoppers receive a product now and pay for it in instalments later?
- •a monthly direct debit
- •a regular standing order
- •an instant bank transfer
- ✓Buy Now Pay Later (BNPL)
Which is often considered 'good debt'?
- •A credit-card debt for designer trainers
- •A loan to pay for a one-night party
- ✓A mortgage to buy a long-term home
- •A payday loan to buy a takeaway meal
Which lets a bank-account holder spend slightly more than their balance?
- •A debit-card refund
- •A savings account
- •A standing order
- ✓An overdraft
What name describes a sudden bill that has not been planned for?
- •a discretionary cost
- •a fixed expense
- •a standing charge
- ✓an emergency cost
Which is a warning sign of a scam phone call?
- •A clear written confirmation by post
- •A polite suggestion to read more later
- •An invitation to visit the bank branch
- ✓Urgent demands for personal bank details
Which loan APR represents the cheapest borrowing?
- •1,200% APR
- •20% APR
- •29.9% APR
- ✓5% APR
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