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

Most credit users are more interested in free benefits than low APRs.

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. -Susan is not married and a female.Which of the following Consumer Credit Laws prohibits credit discrimination on the basis of her status?

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 advice would you give to Monty concerning his use of credit cards?

A secured credit card is a good tool to help establish credit.

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 statements is most correct regarding a secured credit card?

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 to 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?

Credit cards are a form of ________ credit.

List the three primary methods used to determine interest charges on an unpaid credit card balance.

Late library fines and unpaid parking tickets can hurt your credit score.

Your credit score affects

According to a Nellie Mae study,________ of graduate students would have liked more information on financial management topics before they started school and would like financial management education made available to them now.

List the three types of credit card users.