Finance Chapter 8: Managing Credit

as of November 14th then have an outstanding credit card balance of $1,100 from purchases made over the past month the new billing. Begins on November 15th assume Benz outstanding balance for the first 15 days of the new billing. November 15th through 29th is $1,100 then on November 29th the financial institution receives a payment of $600 from Ben reducing his balance to $500 this is the balance for the remaining 15 days. using the previous balance method and a monthly interest rate of 2.5% Benz Financial charge would be

$27.50

John is considering pursuing one of two credit cards credit card a has no annual fee and charges an interest rate of 2 12.5% credit card B has an annual fee of $45 for charges and interest rate of 9% if John is likely to have an average credit card balance of $2,000 the lowest annual expenses John could have with one of these two cards would be

$225

Jill just borrowed $6,000 and will be charged a simple interest rate of 12%. Jill will play will pay how much interest for borrowing the money on September 1st and repaying the money on December 31st

$240

what issues are creditors looking to avoid

High expenses

credit cards are commonly used to pay for items such as Clothing car repairs or a new car

false

the Consumer Financial Protection Bureau was created in 2010 to ensure that credit card companies are treated fairly

false

advantages of using credit include the ability to make purchases without cash and the convenience of not carrying checks

true

credit card companies offer mini incentives such as airline miles and bonuses to get you to use their cards

true

the interest you pay when you use credit cards can have a major impact on the total amount you owe

true

to properly manage your money you should use a credit card only if you will have the cash to cover the payment when you receive your credit card statement

true

consumers with over limit protection on a credit card

will be able to charge purchases that put their total credit card balance above their stated credit limit

why is paying your credit card balance in full so important

you can avoid interest charges

credit has its advantages and disadvantages which of the following is false

you should spend up to the limit on all your credit cards

what information is not important when applying for credit

your health insurance

suppose you have a credit card balance of $500 that you were unable to pay off during the current month you purchase another $250 worth of products you made a payment during the grace period of $300 assuming your retail credit card company charges an annual interest rate of 22% compute your new balance

$454

on your credit card statement the amount that you owe the financial institution now is called the

New Balance

factors to consider when comparing credit cards are

acceptance by Merchant interest rate annual fee and maximum limit

Troy has a credit card that charges 18% on outstanding balances and on cash advantages. the closing date on the credit card is the first of each month. The last month Troy left a balance on his credit card a few hundred dollars this month Troy took out a cash advance of $150 and made $325 in purchases. Troy made a payment of $220. What will be the total of Troy's new balance on his credit card statement taking into account finance charges

amount borrowed= 200+150= 350 monthly finance charge= 350*.18*1/12 =$5.25 new balance= 200+325+150+5.25-220= $460.25

you can impose your own limits on credit card spending by

asking your credit card company to lower your credit limit so that you will be forced to restrict your spending, keep your accounts open but cut up your credit card so that you can not use them, consider using only credit cards sponsored by companies that sell Necessities such as gas stations or home repair services

some of the key Provisions in the credit card act are

credit card companies must clearly disclose the conditions under which fees will be charged perspective card holders, card holders may not be charged in Overland feet unless they have specifically opted-in to the card issuers over limit Protection Program, promotional interest rates offered to entice new card holders must be clearly disclose the deal that is offered

MasterCard and Visa credit cards are not accepted by gas station such a shell which issue their own credit cards

false

some creditors may also extend credit at a higher interest rate to individuals who

have a higher risk of defaulting

credit card interest rates tend to be

higher than rates on other debt

consumer should use this feature sparingly because

it is very costly credit card issuers charge over limit fees as high as $39 per transaction when card holders off to take advantage of this feature

a credit card issued by financial institution and secured by funds deposited by the card holder is a

secured card

which of the following is not true regarding payroll cards

the employer can require employees to accept their wages on these cards

wise use of credit cards include the following

tracking your purchases and paying off the entire card monthly balance to avoid interest charges-> both A and B are correct