Personal Finance CH 5 Review

A credit card offer comes in the mail with the bold print "0% A.P.R. for New Accounts."   Which important piece of information should you find before thinking about signing up?

• What is the A.P.R. after the introductory period?

• What kind of designs can I get on my card?

• Can I get two or more cards with this offer?

• Can I pay my credit card bill online?

Reading through a credit card disclosure (aka the Schumer Box), you see the A.P.R. for a specific card is set at 9.99% - 23.99%. Which of the following statements is probably TRUE?

• One of the primary factors determining your card's A.P.R. is your credit score

• With credit card A.P.R.s, cardholders like higher A.P.R.s because they earn more

• The A.P.R. on credit cards is usually fixed so they won't be adjusted as long as you are a cardholder

• When given a range of A.P.R.s like this, you can assume most cardholders pay the lowest rate listed

Which of these credit card payback strategies would result in your paying the HIGHEST amount of interest?

• Making the minimum payment (3% of your credit card balance) every month on time

• Making the minimum payment (3% of your credit card balance) every month with an occasional late payment

• Paying 20% of your credit card balance every month on time

• Paying off your credit card bill in full every month

BestBank's Visa credit card discloses an A.P.R. of "Prime Rate + 5.74% to Prime Rate + 22.74%." If the Prime Rate increases from 3.25% to 4.25%, what impact would this have on A.P.Rs for cardholders?

• Increase in A.P.R by 1%

• Increase in A.P.R. by 22.74%

• Decrease in A.P.R. by 1%

• No change since credit card A.P.Rs don't change as long as your account is open

Each of the following financial products will help you build credit history EXCEPT:

• Secured credit card

• Debit card

• Home mortgage

• Credit card

Based on the Card Statement below, which of the following  statements is TRUE?

• The cardholder is carrying a balance over from the last period.

• If the cardholder pays $523.20 by the due date on the bill, she will pay NO interest to the credit card company.

• If the cardholder makes her minimum payment of $35.00 by the due date, she will NOT be charged interest on her balances.

• The cardholder was charged interest on her balances for the last period because she made her payment on time.

Based on the Card Statement below, how much credit does this cardholder have available to use?

• About $1600

• $2100

• $0

• About $500

Which of the following statements comparing credit and debit cards is TRUE?

• Credit card companies provide you with a monthly statement, while debit cards do not

• With debit cards, you're spending your own money at point of sale, while with credit cards, you're promising to pay back the money eventually

• Far more businesses accept credit cards than debit cards

• Credit cards pull money directly from your bank account, while debit cards get their money from Visa or Mastercard

What statement about credit cards is TRUE?

• They can help you establish a credit history

• Since they are tied directly to your checking account, they prevent you from spending money you do not have

• If you need to carry a balance, the interest rates are generally quite low (less than 5%)

• As long as you make the minimum payments it's like getting a short-term interest free loan

What financial product am I? I am a type of credit card that requires cardholders to make a security deposit equal to the credit limit on their account. Due to this deposit requirement, I am often a good choice for young people looking to establish their credit history.

• Rewards credit card

• Standard credit card

• Overdraft credit card

• Secured credit card