Personal finance quiz overview
Five ways is secured credit card works
1. You place a refundable security deposit using your bank transfer. 2. The amount of your deposit becomes your spending limit. 3. The credit card company holds your deposit as collateral. 4. Purchases and payments are the same as with any other credit card. 5. You get the deposit back when you close your account.
What is a credit cards APR and how does it work?
APR means annual percentage rate. This number is the annualized interest rate on unpaid balances within your account. Finding a lower APR means you should pay less interest.
Principal
Amount you are borrowing
What criteria are important to consider when comparing different credit card offers?
Annual fee: do you want to know if you pay a fee every year. The fee could be greater than amount of rewards earned. APR; do you want to know what interest charges you'll have to pay if you don't pay the full balance on time
Difference between credit and debit
Credit card; alone, how does a spending limit, requires monthly payments, interest charges on unpaid balances, not linked to a bank account, card does not say debit. Debit; link to a bank account and money comes out immediately.
How can you avoid interest on purchases made with a credit card?
Credit cards only charge interest when the full amount is not paid during your bill cycle
What is one reason a family member might be reluctant to cosign for a credit card?
Family members might feel they will get stuck with the debt, they do not want the responsibility.
Three types of credit cards
General purpose credit card, store or limited purpose card, change cards (for travel and entertainment cards.)
Term
I'm out of time to pay the loan back
What will happen to the total cost of credit card purchases if you only pay the minimum amount
If you only pay the minimum amount each month the interest changes will increase the total cost of your purchase.
Explain two reasons we tend to spend more credit than with cash?
It is difficult to use cash but less obvious when paying with a credit as compared to cash. It is easy to become detached for the money we spend on credit cards because well we may be using the card every day the statement only comes monthly.
Five things to consider when applying for a credit card
Penalty rates and fees: do you want to know what charges you'll have to pay if you are late with a payment. grace period: do you want to know how many days you have to pay off your balance without being charged interest or to pay the minimum so you aren't hit with fees/penalties.
Interest
Percentage that your financial institution charges you for lending you the money
How do you banks make profit?
Thanks make money off interest rate, which is the difference between interest rate they charge buyers and interest rate they pay to those saving the money.
How does security cards work including details and security deposit how payments work in why they are less risky for lenders?
The borrower puts down a security posit that doubles as the credit cards limit. They make purchases as they would with a regular card, and they're responsible for paying at least a minimum balance on time every month. As long as they do so, their account will stay open, they both credit, and their security deposit remains untouched.
What is the relationship between people who save money in banks and people who borrow money from banks
The money deposited at banks by people that save is used by people who borrow money from banks
What happens if you only make the minimum payment on your credit card statement.
There meaning gallon stays in the bank starts to earn interest on it until you paid off!
What are two reasons someone might want to open a secured credit card?
They are unable to open his unsecured credit card because they have bad or limited credit history. Secured cards enable them to develop a stronger credit history with little risk of overspending.
Importance of reading through your credit card statement regularly
To check for errors, Do you understand the terms of the your credit card and see if any changes have been made.
What is a secured credit card
Touching more on the topic above: if they fall behind or don't make payments, the lender uses a security deposit to cover the overdue payments in may close the card. Secured cards are less risky for the lender, because the borrowers own security deposit is on the line.
Three benefits of using credit cards for purchases
Use card to pay for unexpected emergency expenses, coloration of spending into one monthly statement, do you know have to carry cash ride or a checkbook, extended warranty on products you buy.
What happens if you make a late payment?
You you will be charged a fee!
