Week 17-Exit Ticket How Credit Cards Work Quiz

What are some common credit card fees and charges that cardholders may incur?

• Interest-free fees

• Annual fees, late payment fees, cash advance fees, foreign transaction fees

• Reward redemption fees

• Balance transfer fees

Explain the concept of annual percentage rate (APR) and how it affects credit card users.

• The APR is the maximum amount of money credit card users can spend in a year.

• The APR is a fee charged to credit card users for using their card at certain stores.

• The APR determines the amount of interest credit card users will pay on their outstanding balance.

• The APR is a discount given to credit card users for making on-time payments.

Describe the steps involved in the credit card payment process.

• Authorization, Batching, Clearing, and Funding

• Application, Approval, Rejection, and Activation

• Swiping, Approval, Rejection, and Payment

• Selection, Confirmation, Rejection, and Refund

What are the consequences of making only the minimum payment on a credit card balance?

• Decrease in interest charges and shorter payoff time

• Increase in interest charges and longer payoff time

• No change in interest charges and same payoff time

• Credit score improvement and faster debt elimination

What are some security measures that credit card companies use to protect cardholders from fraud?

• Allowing unlimited spending without any verification

• Storing card information in plain text

• Using the same PIN for all cardholders

• Encryption, tokenization, fraud monitoring, EMV chip technology, two-factor authentication

Explain the importance of CVV codes and tokenization in credit card security.

• They make it easier for hackers to access card information

• They provide an additional layer of security by requiring a unique code for each transaction and replacing sensitive card data with a token.

• They are not important for credit card security

• They are only used for online purchases

What are some common rewards and benefits offered by credit card companies to attract customers?

• Unlimited data plan

• Free groceries

• Cashback, travel rewards, sign-up bonuses, 0% introductory APR

• Discounts on gas

How do credit card rewards programs work and what are some potential drawbacks for cardholders?

• Cardholders earn miles for making purchases with their credit card. Potential drawbacks include no annual fees, low interest rates, and unlimited redemption options.

• Cardholders earn points, miles, or cash back for making purchases with their credit card. Potential drawbacks include high annual fees, high interest rates, and limited redemption options.

• Cardholders earn points for making purchases with their credit card. Potential drawbacks include low annual fees, low interest rates, and unlimited redemption options.

• Cardholders earn cash back for making purchases with their credit card. Potential drawbacks include no annual fees, low interest rates, and unlimited redemption options.

How does credit card utilization impact an individual's credit score?

• Credit card utilization can impact an individual's credit score by affecting their credit utilization ratio.

• Credit card utilization only impacts the individual's credit score if they have a low credit limit

• Credit card utilization only impacts the individual's credit score if they have a high income

• Credit card utilization has no impact on an individual's credit score

Explain the concept of credit utilization ratio and its significance in credit scoring.

• The credit utilization ratio is the amount of money you owe on your credit card, and it is not significant in credit scoring.

• The credit utilization ratio is the interest rate on your credit card, and it is not significant in credit scoring.

• The credit utilization ratio is the number of credit cards you have, and it is significant in credit scoring because it shows how diverse your credit portfolio is.

• The credit utilization ratio is the amount of credit you are using compared to the amount of credit you have available. It is significant in credit scoring because it shows how responsibly you manage your credit and can impact your credit score.