Credit Cards and Revolving Debt

What is the primary function of a credit card?

• To provide cashback rewards

• To allow immediate purchases while postponing payment

• To offer low-interest loans

• To improve credit scores

Which feature of credit cards allows balances to carry over from month to month?

• Grace period

• Revolving credit

• Billing cycle

• Credit utilization

What happens if the full balance of a credit card is paid by the due date?

• Interest begins to accumulate

• The account is closed

• Interest is avoided entirely

• A penalty APR is applied

How is interest on credit cards typically calculated?

• Monthly

• Daily

• Quarterly

• Annually

What does the term 'minimum payment' refer to?

• The total balance owed

• The smallest amount required to keep the account in good standing

• The interest charged on the balance

• The amount needed to avoid late fees

How can high credit utilization impact a person’s credit score?

• It improves the credit score

• It has no effect on the credit score

• It negatively impacts the credit score

• It increases the credit limit

What is the purpose of a grace period in credit card usage?

• To allow balances to carry over

• To avoid interest if the balance is paid in full

• To increase the credit limit

• To reduce the APR

What is a penalty APR?

• A lower interest rate applied for timely payments

• A higher interest rate applied after missed payments

• An annual fee charged for using the card

• A fee for foreign transactions

What psychological effect do credit cards have on spending behavior?

• They encourage saving

• They create a sense of immediate loss

• They separate the purchase from the payment, making spending easier

• They discourage unnecessary purchases

What strategy can help avoid long-term debt accumulation with credit cards?

• Carrying a balance

• Paying balances in full

• Using rewards programs extensively

• Increasing credit utilization