Understanding Credit Fees Quiz

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Questions and Answers

What is a common type of fee associated with using a credit card to obtain cash?

Late Payment Fee

Cash Advance Fee (correct)

Annual Fee

Over-Credit-Limit Fee

When is an Annual Fee typically charged in the context of credit cards?

Once per year just for having a card (correct)

When a borrower exceeds their credit limit

For processing a new loan

Charged by lenders for optional insurance

What type of fee is imposed when a borrower fails to make a required payment by the due date?

Annual Fee

Late Payment Fee (correct)

Insurance Fee

Cash Advance Fee

Which fee is applied when a borrower exceeds their credit limit on a credit card?

Over-Credit-Limit Fee Signup and view all the answers

What do Returned Payment Fees refer to in the context of credit?

Charges by lenders for processing a new loan Signup and view all the answers

What does Credit Limit represent in the credit industry?

The maximum amount of credit a lender is willing to extend to a borrower Signup and view all the answers

What is the purpose of credit collection techniques?

To recover money owed by individuals or businesses Signup and view all the answers

When does a bill become past due?

When the customer does not pay within the specified terms Signup and view all the answers

What is a common technique used in credit collection for past due accounts?

Making personal visits to customers Signup and view all the answers

What action may be taken if a customer does not respond positively to a telephone call regarding overdue payments?

Initiating legal action or warning letters Signup and view all the answers

What is one of the consequences mentioned in collection letters for failing to repay a debt?

Negative impact on credit score Signup and view all the answers

How does the collection effort change as a loan account becomes past due?

The collection effort becomes more personal and stricter Signup and view all the answers

What is the characteristic of open credit in terms of payment?

Expecting payment in full each month Signup and view all the answers

Which type of credit requires the balance to be paid in full every month?

Open credit Signup and view all the answers

What is the main purpose of interest rates in financial transactions?

To represent the cost of borrowing or lending money Signup and view all the answers

In what manner can loans be repaid?

In one lump sum or regular installments Signup and view all the answers

What is the typical application of interest rates on credit cards?

Charged monthly on outstanding balances Signup and view all the answers

Which financial tool may have varying interest rates for different activities like purchases or cash advances?

Credit cards Signup and view all the answers

Study Notes

Credit Card Fees

A Cash Advance Fee is a common charge incurred when using a credit card to obtain cash.
An Annual Fee is typically charged once a year for maintaining a credit card account.
A Late Payment Fee is imposed when a borrower fails to make a required payment by the due date.
An Over-Limit Fee is applied when a borrower exceeds their credit limit on a credit card.
Returned Payment Fees occur when a payment made by the borrower is returned, typically due to insufficient funds.

Credit Concepts

Credit Limit represents the maximum amount a borrower can charge on a credit card.
The purpose of credit collection techniques is to recover overdue payments efficiently.

Payment Timing

A bill becomes past due when the payment is not received by the established deadline.
A common technique in credit collection for past due accounts is telephone calls to remind borrowers of their obligations.

Collection Actions

If a customer does not respond to telephone calls about overdue payments, further actions may include sending collection letters or engaging a collection agency.
Collection letters often mention consequences such as negative credit reporting for failing to repay a debt.

Loan Management

As a loan account becomes past due, the intensity and frequency of collection efforts typically increase.
Open credit allows for flexible payment options, but making regular payments is expected.
Revolving credit requires the balance to be paid in full every month to avoid interest.

Financial Transactions

The main purpose of interest rates is to compensate lenders for the risk of lending money and the opportunity cost of providing loans.
Loans can be repaid in various manners, including lump-sum payments or installments.
Interest rates on credit cards are usually applied to balances carried beyond the due date or for specific types of transactions.
A credit card may have varying interest rates for different activities, such as purchases, cash advances, or balance transfers.

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Description

Test your knowledge about various fees associated with borrowing money or using credit-related services. Learn about common types of fees imposed by lenders or financial institutions in the realm of credit.