Study Guide

Many credit card companies will let you determine your interest rate and your credit limit when they approve you for their card.

False.

The interest rate a credit card company gives you when you first get your credit card can never be changed, even if your credit gets ruined and you don't make your credit card payments on time.

False.

If I pay off my entire credit card bill before this date, I do not have to pay interest on the money I have borrowed on my credit card. What is this called?

Grace period.

What should I do if I cannot pay off my credit card bill in full? Choose the correct answer:

I should at least make the minimum payment, but should make the biggest payment I can afford.

Which of these choices shows the smartest thinking?

I use my credit card to build my credit and for convenience. But I try to never finance purchases with my credit card. Instead, if I really do need to finance an important purchase, I go to my credit union or bank and try to get a much cheaper loan than a credit card loan.

Which of these choices is NOT the smartest thing to do?

I use my credit card to help my friends buy stuff they cannot afford.

What could happen if you do not shop around for the right credit card company?

Your interest rate could increase even though you pay your bills on time.

You have a credit card with a $600 limit. You plan to always pay your card off in full each month before the grace period ends. What is the amount you can safely owe on your card?

$480.

Select the false statement:

All of the above. (It is OK to be late on a credit card payment. / I should not try to pay off my credit card bill in full each month, because it helps build good credit. / I should never pay more than my minimum payment on my credit card balance.)

Okay, here comes a really tough question. Choose the correct statement:

Because I have no credit and no one to help me get my first credit card, I may have to get a "secured" credit card. That's okay. That means I may have to keep some money in a savings account for a time.

Why should I probably get my first credit card from the same institution that has my checking and/or savings account?

Because building a relationship with a financial institution makes good sense. You should not. You should get your first card at one of those really cool student websites.

Why do you think that we named this module "Sucker Punch"? Choose the one best answer.

Because we want you to be aware that credit cards can be as painful as an unexpected punch in the stomach. Most credit card companies are out for themselves - they're not really looking out for you. So you - that's you - have to be on the alert for the sucker punches when you get ready to choose and use a credit card.

Why should you never borrow up to your credit limit on a credit card? Choose the best answer.

Borrowing up to your credit limit on your credit card increases your "debt-to-income" ratio. Having a high "debt-to-income" ratio is one reason some credit bureaus lower a person's credit rating.

The maximum amount of money that you can charge on a credit card is called:

Credit limit.

I should take any credit card I can get from a company regardless of terms and conditions.

False.

Credit cards are expensive ways to borrow money.

True.

If you have a credit card limit of $1,000, you should never carry a balance of more than $800.

True.

If you make a late payment on a 0% interest credit card, you're responsible for paying the entire interest from the time you opened the card.

True.

Your interest rate on your loan with the credit card company can go up big time if you make late payments, or go over your credit limit.

True.

What statements best describe a store charge card? Store cards do not have the name of the store on them.

Usually, the store card can only be used at the store or at other businesses that store may own.

What is the difference between a debit/ATM card and a credit card?

With a debit/ATM card you are spending your own money. With a credit card you are always borrowing money.