Credit Cards – The Basics

What is a credit card?

• An agreement with a bank to borrow money for purchases and pay back later

• A type of savings account

• A way to earn money from the bank

• A loan from a friend

What do credit card holders agree to pay for the convenience of using the bank’s money?

• Low interest rates

• High interest rates

• No interest

• Monthly fees only

Fill in the blank: The money that people owe from using credit cards is called _______.

• debt

• income

• savings

• interest

True or False: Stores that accept credit cards do not have to pay any fees to credit card companies.

• True

• False

One way to avoid paying credit card interest is to:

• Pay your balance in full each month

• Only make the minimum payment

• Pay after the due date

• Ignore your monthly statement

What is an incentive that banks might offer to encourage people to use their credit cards?

• Free merchandise

• Store credits

• Cash back

• All of the above

The bank benefits from earning _______ on the borrowed money.

• interest

• rewards

• cashback

• points

Stores benefit from allowing credit cards to be used because:

• they can increase sales by offering more payment options

• they avoid all transaction fees

• they eliminate the need for cash registers

• they guarantee all payments are fraud-free

Why would a bank offer a credit card which allows users to use the bank’s money?

• Credit card banks make a lot of money off credit card interest and fees.

• The government pays banks to offer credit cards.

• Consumers have to pay a lot of money to get a credit card.

• Banks hope that credit card users will open checking and savings accounts.

People that use credit cards but don’t pay them off right away increase what?

• bank fees

• purchases

• debt

• rewards