Mastering Credit Cards: Getting a Credit Card Reading Quiz

1. What is a credit score?

A numerical value representing a person's creditworthiness.

The amount of money a person owes on their credit cards.

The total credit limit available on a person's cards.

The length of time a person has been using credit.

A credit score is a numerical value that represents a person's creditworthiness. It is calculated based on various factors such as payment history, credit utilization, length of credit history, and types of credit.

Explanation

A credit score is a numerical value that represents a person's creditworthiness. It is calculated based on various factors such as payment history, credit utilization, length of credit history, and types of credit.

2. What does responsible credit card usage mean?

Using the maximum credit limit on the card.

Paying off the full balance on time every month.

Making only the minimum payment each month.

Closing the credit card after a few months of use.

Responsible credit card usage means paying off the full balance on time every month. It helps maintain a good credit score, avoid unnecessary interest charges, and demonstrate financial responsibility.

Explanation

Responsible credit card usage means paying off the full balance on time every month. It helps maintain a good credit score, avoid unnecessary interest charges, and demonstrate financial responsibility.

3. How does credit card usage impact credit history?

It helps build a positive credit history if used responsibly.

It has no impact on credit history.

It doesn't affects credit history even if payments are missed.

It only affects credit history if the credit limit is exceeded.

Responsible credit card usage helps build a positive credit history. Timely payments, low credit utilization, and a long credit history with a credit card can improve credit scores and increase creditworthiness.

Explanation

Responsible credit card usage helps build a positive credit history. Timely payments, low credit utilization, and a long credit history with a credit card can improve credit scores and increase creditworthiness.

4. What is an important factor to consider when choosing a credit card?

The color and design of the card.

The credit limit offered by the card.

The number of rewards points earned per purchase.

Interest rates and fees associated with the card.

When choosing a credit card, it is important to consider the interest rates and fees associated with the card. High interest rates and excessive fees can significantly impact the cost of borrowing and maintaining the card.

Explanation

When choosing a credit card, it is important to consider the interest rates and fees associated with the card. High interest rates and excessive fees can significantly impact the cost of borrowing and maintaining the card.

5. What is a secured credit card?

A card that requires a cash security deposit as collateral.

A card with a high credit limit.

A card specifically for international travel.

A card that offers exclusive rewards and benefits.

A secured credit card is a card that requires a cash security deposit as collateral. The deposit serves as protection for the lender in case the cardholder fails to make payment. Secured cards are often used to establish or rebuild credit.

Explanation

A secured credit card is a card that requires a cash security deposit as collateral. The deposit serves as protection for the lender in case the cardholder fails to make payment. Secured cards are often used to establish or rebuild credit.

6. What does APR stand for?

Average Payment Requirement

Automatic Payment Reminder

Annual Percentage Rate

Advanced Purchase Rate

APR stands for Annual Percentage Rate. It is a standardized way of expressing the cost of borrowing or the cost of credit over time. The APR includes the interest rate as well as any additional fees or costs associated with the loan or credit card. It provides borrowers with a more comprehensive understanding of the overall cost of credit.

Explanation

APR stands for Annual Percentage Rate. It is a standardized way of expressing the cost of borrowing or the cost of credit over time. The APR includes the interest rate as well as any additional fees or costs associated with the loan or credit card. It provides borrowers with a more comprehensive understanding of the overall cost of credit.

7. What is the purpose of a credit limit?

The minimum amount required to keep a credit card active.

The maximum amount a person can borrow or charge on a credit card.

The amount a person owes on their credit card.

The interest charged on a person's credit card balance.

The purpose of a credit limit is to determine the maximum amount a person can borrow or charge on a credit card. It acts as a safeguard for both the cardholder and the lender.

Explanation

The purpose of a credit limit is to determine the maximum amount a person can borrow or charge on a credit card. It acts as a safeguard for both the cardholder and the lender.

8. What is an interest rate?

The amount of money you earn through investments.

The minimum payment required on a credit card.

The amount of money charged for borrowing or using credit.

A fee charged for late payments.

An interest rate is the amount of money charged by a lender for borrowing or using credit. It is expressed as a percentage of the amount borrowed or charged and is added to the overall balance.

Explanation

An interest rate is the amount of money charged by a lender for borrowing or using credit. It is expressed as a percentage of the amount borrowed or charged and is added to the overall balance.

9. What does it mean to carry a balance on a credit card?

Not paying off the full balance by the due date.

Having a high credit limit on the card.

Maintaining a low credit utilization ratio.

Closing the credit card account after use.

To carry a balance on a credit card means not paying off the full balance by the due date. This can result in the accumulation of interest charges on the remaining balance.

Explanation

To carry a balance on a credit card means not paying off the full balance by the due date. This can result in the accumulation of interest charges on the remaining balance.

10. What is a grace period on a credit card?

A period during which no payments are required.

A period to dispute incorrect charges on the card.

A period during which no interest is charged on new purchases.

A period to earn bonus rewards points.

A grace period on a credit card is a period during which no interest is charged on new purchases. It usually lasts between 21 and 25 days and allows cardholders to pay their balance in full without incurring interest charges.

Explanation

A grace period on a credit card is a period during which no interest is charged on new purchases. It usually lasts between 21 and 25 days and allows cardholders to pay their balance in full without incurring interest charges.