Credit Card Strategies and Costs

Which of these credit payback strategies would lead to the HIGHEST overall cost?

• Paying off your credit card bill in full every month

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

• 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

Select the statement below that accurately describes a characteristic of a credit card.

• You owe the same payment every month

• You must have money deposited into a checking account to use the credit card for purchases

• Making full payments on-time every month is the only way to avoid interest charges

• They do not charge interest

Dug has a credit card with a $1,000 credit limit. His outstanding balance is currently $800. What is the maximum amount he can now spend on this credit card?

• $200

• $800

• $1000

• $1800

Why would credit card companies prefer that their cardholders make the minimum monthly payment every month rather than paying their total balance in full?

• This is required by federal law for tax purposes

• This allows the card holder to pay their bill quickly and close the card when they’re ready

• This enables the credit card company to make more money

• This helps cardholders develop financial independence

If you buy a $1000 bicycle, which credit card payoff strategy will result in your paying the LEAST total amount?

• Pay the minimum monthly payment

• Pay $100 per month for 10 months

• Pay $250 per month until it’s paid off

If your credit card limit is $800 and your outstanding balance is $725, what is the largest amount you can charge on that card in the upcoming month?

• $0

• $75

• $725

• $800

Each of the following people has $5,000 in debt. Which debt is most worthwhile?

• Phil, who spent mostly on GoFundMe campaigns for people he saw on social media

• Tyree, who took out a loan for an old used car so he can drive to and from campus

• JJ, who used a credit card to pay his daily expenses while he was out of a job

• It’s impossible to tell, because we don’t know how much they each valued the spending, how much it impacted their lives, or how easily they can repay the debt