Podcast
Questions and Answers
A credit cardholder has a $5,000 credit line and makes $5,200 in purchases in one month. What fee will they likely incur?
A credit cardholder has a $5,000 credit line and makes $5,200 in purchases in one month. What fee will they likely incur?
- Minimum finance charge
- Over-the-limit fee (correct)
- Late payment fee
- Annual fee
What is the primary purpose of a secured credit card?
What is the primary purpose of a secured credit card?
- To access higher credit lines than unsecured cards
- To avoid paying annual fees
- To build or rebuild credit history (correct)
- To earn rewards points on purchases
Which of the following best describes the information found within the 'Schumer Box'?
Which of the following best describes the information found within the 'Schumer Box'?
- Key terms and fees associated with the credit card, presented in a standardized format. (correct)
- Personal information about the cardholder, used for identity verification.
- A detailed history of all transactions made on the credit card.
- A summary of the cardholder's credit score and credit report.
A borrower has multiple credit accounts. Which of the following describes 'Universal Default'?
A borrower has multiple credit accounts. Which of the following describes 'Universal Default'?
A cardholder disputes a fraudulent charge on their credit card statement. What process allows them to receive a refund?
A cardholder disputes a fraudulent charge on their credit card statement. What process allows them to receive a refund?
Which of the following factors has the biggest impact on your credit score?
Which of the following factors has the biggest impact on your credit score?
What is the significance of the Truth in Lending Act?
What is the significance of the Truth in Lending Act?
Which of the following is an example of a 'variable interest rate' on a credit card?
Which of the following is an example of a 'variable interest rate' on a credit card?
Why is it important to pay more than the minimum payment due on a credit card?
Why is it important to pay more than the minimum payment due on a credit card?
Which of the following entities is responsible for providing a credit score?
Which of the following entities is responsible for providing a credit score?
Flashcards
Annual Fee
Annual Fee
A yearly charge for using a credit card.
Annual Percentage Rate (APR)
Annual Percentage Rate (APR)
The cost of borrowing money on a credit card, expressed as a yearly interest rate.
Credit Line
Credit Line
The maximum amount of money a cardholder can borrow on a credit card.
Credit Score
Credit Score
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Due Date
Due Date
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Grace Period
Grace Period
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Minimum Payment
Minimum Payment
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Schumer Box
Schumer Box
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Secured Credit Cards
Secured Credit Cards
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Universal Default
Universal Default
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Study Notes
- Credit cards are plastic or digital cards that enables borrowing funds up to a predetermined limit for purchases.
Credit Card Fees and Charges
- Annual Fee: A yearly charge to use a credit card.
- Over-the-limit Fee: Charged when a credit card's limit is exceeded.
- Finance Charge: It represents the cost of borrowing money, incorporating both interest and fees.
- Minimum Finance Charge: The lowest amount of interest applied when a finance charge is applicable.
Interest Rates
- Annual Percentage Rate (APR): The cost of credit card borrowing, expressed as a yearly interest rate.
- Fixed APR: An unchanging interest rate on a credit card.
- Variable Interest Rate: An interest rate that fluctuates based on market conditions or a financial index.
Credit and Creditworthiness
- Credit: The ability to borrow money and/or access services/goods with a promise to pay later.
- Credit Line: The maximum borrowing amount available on a credit card.
- Credit Score: A numerical rating, typically 300-850, assessing creditworthiness.
- Secured Credit Cards: Credit cards backed by a cash deposit, designed to build or rebuild credit.
- Unsecured Credit Cards: Credit cards issued without requiring a cash deposit, granted based on creditworthiness.
Credit Card Terms and Agreements
- Card Member Agreement: A document outlining the terms, fees, and rules of a credit card account.
- Terms and Conditions: The rules, fees, and policies linked to a credit card account.
- Schumer Box: A table on credit card agreements displaying key terms like APR and fees.
Payments and Due Dates
- Due Date: The deadline for making a credit card payment to avoid late fees.
- Minimum Payment: The smallest required monthly payment to keep a credit card account in good standing.
- Grace Period: The period between a purchase and the start of interest accrual if the balance is not paid.
Dispute Resolution
- Charge-Back: A refund issued by a credit card company when a transaction is disputed.
Lending Policies
- Universal Default: A policy where lenders can increase interest rates if a borrower is late on payments to any creditor.
Credit Reporting Agencies
- Equifax: One of the three major credit reporting agencies in the U.S.
- Experian: Another major credit reporting agency that tracks credit history.
- TransUnion: The third major credit reporting agency that collects credit data.
Legislation
- Truth in Lending Act: U.S. federal law mandating lenders to disclose key loan terms, fees, and costs to borrowers.
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