5.6 Credit Cards

A credit card requires you to:

• make a fixed monthly payment until the loan is paid off

• make a minimum payment based on the outstanding balance

• pay interest on all purchases

• obtain approval from the lender before making a purchase

Which of the following statements is TRUE regarding credit cards?

• you may pay off a credit card balance at any time without penalty

• if you pay off a credit card balance early, you will pay a penalty

• you may not pay off a pay off a credit card balance unless you receive approval from the credit card company

• you must make more than the monthly minimum payment to avoid paying interest

The interest rate that applies when a borrower makes late payments is called a:

• credit limit APR

• balance transfer APR

• penalty APR

• closed account APR

Which of the following is closest to the actual average interest rate charged by credit card issuers?

• 5%

• 9%

• 12%

• 19%

Under the CARD Act of 2009, how many days do you have to pay your new credit card bill before the next payment is due? (hint: this is the same amount of time you have to pay off any new balance before incurring a finance charge.)

• 10 days

• 12 days

• 21 days

• 30 days

Martie regularly flies Blue Sky Airlines. The airlines offers a Visa co-branded credit card that allows cardholders to earn points towards free flights. Cardholders also get to check one bag for free on each flight. The Blue Sky Airlines credit card is an example of a:

• prepaid card

• co-signed card

• travel and entertainment card

• reward card

Which of the following can happen if you co-sign a credit card and the cardholder fails to make a payment?

• you can be asked by the credit card company to make the payment

• your credit score can be negatively affected

• your ability to obtain a credit card in your own name can be damaged

• All of the answer choices are correct

What will likely happen if Terry Ann fails to make a payment on her secured credit card?

• the bank or credit union may cancel the card

• the bank or credit union will deduct the payment directly from Terry Ann's account

• the bank or credit union will deduct any fees directly from Terry Ann's account

• all of the answer choices are correct

What is a finance charge?

• The amount of interest charged to an account for the billing cycle. 
• A fixed annual percentage rate of the finance charge.
• A charge from the bank for getting a credit card. 
• None of the above. 

Annual Percentage Rate (APR) is the yearly percentage rate of the finance charge. 

• True
• False