Types of Credit Bell Ringer 2

Which statement is true of both debit AND credit cards?

• Both can trap you in an endless cycle of debt if you’re not careful

• Both allow you to make purchases in a store or online

• Both typically have interest rates between 10-30%

• Both require you to pay a minimum monthly payment when your bill arrives

Felix opens a credit card with no annual fee, so he assumes that using the credit card regularly will be absolutely free for the next two years while he finishes grad school. Why is his assumption incorrect?

• Unless he pays the whole bill every month, he will pay interest according to his APR

• He will automatically pay penalty fees if he uses his credit card for more than 3 consecutive months

• If his grace period is any longer than 10 days, he will have to pay fees

• He will need to pay a separate student fee because he is still in grad school

Which statement best describes a Schumer box?

• The final calculation of how much you owe on your credit card bill each month

• A standardized way of presenting the key terms of your credit card agreement

• A legal document stating that you’re behind on your credit card payments

• The outstanding balance on your credit card once you’ve made your recent payment

As a young adult, all of the following are good strategies for building credit, EXCEPT:

• Open a credit card, with your parent or guardian as a cosigner

• Take out a payday loan

• Become an authorized user on a credit card used by your parent or guardian

• Open and use a secured credit card

What is an advantage of using a credit card?

• It will not affect your credit score or credit history

• Since it is tied directly to your checking account, it prevents 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%)

• You can make an emergency purchase that you otherwise don’t have the money to pay for right now

Reading through a credit card’s Schumer Box, you see the APR for a specific card is set at 9.99% - 23.99%. Which statement is true?

• When given a range of APRs like this, you can assume most cardholders pay the lowest rate listed

• Your APR will be within that range, depending on the strength of your credit history

• In this case, you want the highest APR in the range because you’ll earn more

• The APR on credit cards is usually fixed, so it won't be adjusted as long as you are a cardholder

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

• 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

• 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, but with credit cards, you're getting a loan that you need to pay back later

Shira is trying to decide between getting a debit card, a prepaid debit card, and a credit card. Which statement is true?

• All 3 cards are completely different

• Debit cards and prepaid debit cards are the same

• Debit cards and credit cards are the same

• All 3 cards are completely the same