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