Understanding Credit Card Finance Charges

The video tutorial explains finance charges on credit cards, focusing on one method of calculation. It covers the concept of finance charges, the impact of APR and credit scores, and provides a step-by-step example of calculating a finance charge. The tutorial concludes with advice on using credit cards responsibly to avoid unnecessary charges.

What is the primary focus of the video regarding finance charges?

• One specific method of calculating finance charges

• All methods of calculating finance charges

• How to avoid finance charges

• The history of finance charges

How is a finance charge best described?

• A penalty for using a credit card

• A reward for paying off debt early

• A fee for opening a credit card account

• The cost of borrowing money and not paying it back on time

What happens if you pay your credit card balance within the grace period?

• You incur a finance charge

• You avoid a finance charge

• Your credit score decreases

• You receive a penalty

How does a lower credit score affect your APR?

• It makes your APR fixed

• It increases your APR

• It has no effect on your APR

• It decreases your APR

What is the average range for APR on credit cards?

• 5% to 10%

• 30% to 40%

• 12% to 24%

• 25% to 35%

How do you calculate the monthly finance charge?

• APR divided by 24 times the average daily balance

• APR times the total balance

• APR divided by 365 times the daily balance

• APR divided by 12 times the average daily balance

In the example, what is the APR used for the calculation?

• 12.99%

• 15.99%

• 17.99%

• 19.99%

What is the finance charge calculated in the example?

• $65.37

• $75.27

• $45.67

• $55.47

What is the new balance after adding the finance charge in the example?

• $3,775.47

• $3,785.47

• $3,765.47

• $3,755.47

What is the key takeaway regarding credit card use?

• Avoid using credit cards entirely

• Only use credit cards if you can pay off the balance on time

• Always carry a balance to build credit

• Use credit cards for all purchases