Understanding Credit and Payment Methods

What is the primary difference between a debit card and a credit card?

• Debit cards allow you to borrow money from the bank.

• Debit cards use funds directly from your bank account.

• Credit cards do not require any repayment.

• Credit cards are linked directly to your savings account.

Why is it important to shop around for credit cards and banks?

• All credit cards and banks offer the same interest rates and fees.

• Different credit cards and banks offer varying interest rates and fees, which can save you money.

• Shopping around is unnecessary because all financial institutions are regulated.

• It is only important if you plan to use a credit card frequently.

How does your credit history affect your ability to make purchases?

• It has no effect on your purchasing power.

• A good credit history can help you qualify for better interest rates and loan terms.

• A poor credit history will automatically prevent you from making any purchases.

• Credit history only affects large purchases like homes and cars.

What happens if you do not pay your credit card balance in full by the due date?

• You will not incur any additional charges.

• You may be charged interest on the remaining balance.

• Your credit card will be automatically canceled.

• You will receive a reward for partial payment.

Which of the following is a benefit of maintaining a good credit score?

• It guarantees you will never be denied a loan.

• It helps you qualify for lower interest rates and better loan terms.

• It allows you to avoid paying taxes.

• It ensures you will receive a credit card with no fees.

What is the effect of a lower interest rate on the total amount paid for a loan?

• You pay more money in total.

• You pay less money in total.

• It has no effect on the total amount paid.

• It only affects the monthly payment amount.

Which of the following statements is FALSE regarding credit card payments?

• Paying the minimum payment waives the interest on the remaining balance.

• Late payments may incur a fee.

• Paying the full statement balance by the due date avoids interest and fees.

• Making only the minimum payment can lead to higher interest costs over time.

What is a secured credit card, and how can it help build credit?

• A secured credit card requires no deposit and offers high credit limits.

• A secured credit card requires a security deposit, which helps limit spending and build credit.

• A secured credit card is only available to those with excellent credit.

• A secured credit card does not report to credit bureaus.

What is the principal in terms of a loan?

• The total amount of interest paid over the loan term.

• The original amount of money borrowed, excluding interest.

• The monthly payment amount.

• The total amount of money repaid over the loan term.

Why is discipline important when using different payment methods?

• It ensures you never use credit cards.

• It helps manage spending and avoid unnecessary debt.

• It guarantees you will always have a high credit score.

• It allows you to ignore interest rates and fees.