Chapter #7 Mastery Check!

Front

What does APR stand for?

Back

Annual Percentage Rate

Answer explanation

APR stands for Annual Percentage Rate, which is the annualized interest rate that reflects the true cost of borrowing, including fees and other costs. This makes 'Annual Percentage Rate' the correct choice.

Front

The least amount that must be paid on a credit card each month is

Back

Minimum Payment

Answer explanation

The least amount that must be paid on a credit card each month is the Minimum Payment. This is the minimum required to keep the account in good standing and avoid late fees.

Front

How can a cardholder avoid paying interest on a credit card?

Back

Pay the balance in full every month

Answer explanation

To avoid paying interest on a credit card, a cardholder should pay the balance in full every month. This ensures that they do not carry a balance into the next billing cycle, which would incur interest charges.

Front

Grace Period - The time allowed to pay your balance without being charged a finance charge. Usually 25 to 30 days.

Back

True

Answer explanation

The statement about the grace period being the time allowed to pay your balance without a finance charge is true. Typically, this period lasts between 25 to 30 days, confirming the correct answer is True.

Front

Credit cards can help you build a credit history that will improve your chances of getting house or car loans in the future.

Back

True

Answer explanation

True. Credit cards can help establish a credit history, which is crucial for lenders when assessing your eligibility for house or car loans in the future.

Front

You have a choice between two credit cards: American Express 8.99% or Chase Sapphire 12.99%. Which card offers the better rate?

Back

American Express

Answer explanation

The American Express card offers a lower interest rate of 8.99% compared to the Chase Sapphire's 12.99%. Therefore, American Express is the better choice for a credit card with a lower rate.

Front

You charge $500 on each of your two credit cards. One is American Express with an interest rate of 15.99%. The other is Chase Sapphire with an interest rate of 20.99%. Assuming that you are only making the minimum payment of $25 to each of the credit card companies, which card will you have paid more interest for?

Back

Chase Sapphire

Answer explanation

The Chase Sapphire card has a higher interest rate of 20.99% compared to American Express's 15.99%. Therefore, with the same balance and minimum payment, you will accumulate more interest on the Chase Sapphire card.

Front

What is an annual fee?

Back

A fee charged by a card issuer for being a card holder.

Answer explanation

An annual fee is a charge imposed by a card issuer for the privilege of holding a credit card. This fee is typically billed once a year, making the correct choice "A fee charged by a card issuer for being a card holder."

Front

The cost of borrowing money is referred to as

Back

Interest

Answer explanation

The cost of borrowing money is known as interest. It is the fee charged by lenders to borrowers for the use of their money, typically expressed as a percentage of the principal amount.

Front

This card is tied to your checking account.

Back

Debit Card

Answer explanation

A debit card is directly linked to your checking account, allowing you to spend money you have. In contrast, a credit card allows borrowing against a credit limit, making 'Debit Card' the correct choice.