How Does Credit Card Interest WS

Question 1

Credit

Answer 1

The ability of a lender to pay back a payment over time

Question 2

Principle

Answer 2

The initial price you owe before interest

Question 3

Interets

Answer 3

An addition amount of money that accumulates as you are paying off debt over time

Question 4

Credit Card

Answer 4

Easy access to money that you borrow. You have to pay back what you spend over time

Question 5

Instalment Loan

Answer 5

Loans that are paid off over time from scheduled payments.

EX:Student Loans, Car Loans, Mortgage, Pay Day Loan

Question 6

Annual Percentage Rate (APR)

Answer 6

The amount of interest that is determined by the cost of borrowing, plus additional fees.

Question 7

Minimum Payment

Answer 7

The minimum amount of money that can be paid back on a loan at a time

Question 7

Credit Limit

Answer 7

The maximum amount a lender can borrow money

Question 8

Revolving credit

Answer 8

A line of credit that stays the same even if you pay the balance in full.

Question 9

Revolving balance

Answer 9

A balance that carries on month by month

Question 10

Simple interest

Answer 10

Calculated by the money you owe (principle)

Question 11

Compound interest

Answer 11

calculated from the principle and accumulated interest

Question 12

How often do credit cards compound interest?

Answer 12

They normally do it daily

Question 13

What is a grace period

Answer 13

A time of period where interest is paid by the government and payments are not due until it ends.

Question 14

When does the grace period expire?

Answer 14

6 months

Question 15

When does the grace period return?

Answer 15

When you go back to school

Question 16

What is the prime rate and does it always stay the same?

Answer 16

The interest rates commercial banks will charge their clients based on the Federal Funds Rate. It does not stay the same because of inflation

Question 17

How does your credit score impact your APR?

Answer 17

The better your credit score, the lower you will pay in APR

Question 18

Identify a pro and con of balance transfers.

Answer 18

Balance transfer fees, 3%-5%
You can pay off debts more easily

Question 19

What can happen if you do not pay your credit card on time?

Answer 19

It will hurt your credit score, your credit worthiness will lower

Question 20

How can a late payment on one card affect the interest rates on another?

Answer 20

45 days

Question 21

What can you do in the future to prevent yourself from acquiring a massive credit card debt?

Answer 21

Using your credit card for important big purchases and paying it on time

Question 22

How does a credit card differ from an installment loan?

Answer 22

Installment loans (student loans, mortgages, car loans) show you can pay back money you borrowed consistently over time

Credit cards show you spend varying amounts of money every month and manage your own cash flow.

Question 23

Give an example of an item a consumer would use an installment loan instead of a credit card?

Answer 23

Car Loans, you can pay back money you borrowed over time.