Ch 8 Quiz
What is the biggest disadvantage of a proprietary card?
It is limited in use to certain establishments.
Why is paying your credit card balance in full so important?
You can avoid interest charges.
What information is not important when applying for credit?
Your health insurance.
Why should you self-impose a tight credit limit?
A tight credit limit will assure you have the cash for other expenses and to invest.
You should review your credit card statement before paying the bill:
for accuracy. You might discover a math error or even fraudulent use of your card.
Credit cards generate revenue by charging the:
merchants 2 to 4% of the payment.
A finance charge is applied to credit purchases:
when a bill is not paid in full before the due date.
A cash advance is:
when the cardholder receives cash rather than goods or services.
How does it differ from a secured credit card?
Prepaid cards are a form of electronic cash and are not credit per se.
The main difference between a credit card like MasterCard or Visa and a retail (or proprietary) card is that:
The merchant doesn't pay a percentage when retail cards are used
Factors to consider when comparing credit cards are:
acceptance by merchants, interest rate, annual fee and maximum limit.
Secured credit cards are:
backed with funds deposited into a special account. The funds serve as collateral in the event the cardholder fails to make a payment.
A common range of interest rates on credit cards is:
between 15 to 20%.
Cash advances are commonly obtained:
by writing a check provided by the credit card company or from ATMs
Secured cards allow:
cardholders to begin rebuilding damaged credit.
Prepaid cards are:
cards that can be purchased that are electronically loaded with a specific amount of cash. The cards can then be used just like a credit card until the balance is depleted.
Some typical incentives offered are:
cash back, airline miles, or discounts on goods and services. Other cards donate money to a favorite charity.
If you discover an error, you should:
dispute any errors in writing within a 60-day period. However, if you suspect fraud call the credit card issuer immediately and have them issue a new credit card.
Some creditors may also extend credit at higher interest rates to individuals who:
have a higher risk of defaulting.
Credit cards are a convenience and you should not use them unless you:
have the cash to cover the payment
What attribute are creditors looking to avoid?
high expenses
Credit card interest rates tend to be:
higher than rates on other debt.
With cash advances, the interest rate is usually:
higher, there is no grace period, and there may be a transaction fee of 1 or 2% of the advance.
You increase your credit limit by:
paying credit card bills on time.
You can use a grace period to your advantage by making:
purchases earlier in the billing cycle, giving you a longer period of free credit.
A disadvantage to using a credit card is that:
the interest rates are high if you do not pay off the balance when due.
It is limited in use to certain establishments.
the maximum amount of credit you are allowed.
A grace period is:
the time between your statement closing and the due date on the bill
One advantage of using a credit card is that:
they provide free financing until the statement arrives
