Exam 6: Using Credit Cards: The Role of Open Credit

Leon is 28 years old and pays cash for everything he buys. He has never had credit in his name and never missed or been late on any bills he has ever had. He recently went online to check what his credit score was. Where do you think his credit score would be?

Changes to your credit card policies and rates are usually announced via "________"; which are notices enclosed with your bill.

List four ways to avoid credit card fraud.

Jerome has three major credit cards and makes payments on them each month. He has had one of them for six years, another for three years, and the last for eleven months. Making just the minimum payment has become automatic at this point, and Jerome barely even looks at the statements. Jerome is beginning to think that his approach to credit may be faulty, and he wants fo find out how to adjust it. He just applied for two additional credit cards. -Based on his credit card usage, which of the following aspects of a credit card should be most important to Jerome?

Which of the following statements is most correct regarding a secured credit card?

Taking a cash advance on your credit card for daily living expenses may not be a wise financial decision because interest begins on the cash advance balance amount immediately.

Monty currently has a Visa card from his bank with the following terms: 18% on purchases, 24% on cash advances with a 4% cash advance fee on the amount, and a default or penalty rate of 36%. His current statement shows a balance of $6,000. So far he has only taken one cash advance, withdrawing $1,000 from a casino in Las Vegas a year ago, which he has already paid off. Lately he has been having a hard time paying more than the minimum payment of 4% of his balance. The only assets he owns are a seven-year-old car and a $2,500 certificate of deposit that has a 5% APR. -What is the current APY on this credit card?

The major differences between a premium prestige card and a regular credit card include

Only Prestige or Premium credit cards offer a grace period.

Alan has a credit limit and a balance of $3,000 on his Visa card. His car broke down, he charged the $500 repairs to his Visa which he knows put him over his credit limit for the month. His payment is due on the 20th so he made sure that he had his $750 payment to the post office on the 20th. Most likely, what penalties or fees, if any, will he incur?

Your credit score affects

Assume a 31-day month to calculate your average daily balance for your credit card bill. Your daily balance for the first 10 days was $1,400, for the next 10 days was $1900, and for the last 10 days was $2700. What will your average daily balance be at the end of the month?

Due to compounding frequency, the actual interest rate or APY you pay is higher than the advertised interest rate or APR.

Which of the following are important to convenience users of credit cards?

Josh was sued by his former business partner. He lost the case and has to pay his former partner $10,000. He has not yet done so and is refusing to do so. Josh is applying for a mortgage for a new home. Should he be worried about the lawsuit impacting his mortgage application?

Which of the following is not a disadvantage of credit cards?

When you find you cannot pay your credit card bills you must take action! Which option is advisable?

Tawnya currently has six bank credit cards, five retailer credit cards, and a T&E card left over from when she was in sales. She wants to make sure her credit score is as high as it can be. What advice would you give her to improve her credit score?

________ is not information generally found in your credit report.

Susan has always maintained an excellent credit rating over the years. She has an annual income of $63,000, has lived at her current residence thirteen years, and has worked at the same job for eight years. Susan works in a clerical position, has two credit cards and maintains two bank accounts. Susan is very conservative and has all of her savings ($12,000) in a NOW account at her local bank. One of her credit cards has a balance of $550 and has an APR of 23%. Susan has been making monthly minimum payments on the credit card. Out of curiosity she would like to know how her credit card companies judge her creditworthiness and what she can do to improve her financial situation. -What should Susan do in regards to her credit card balance?