#1
1. What does APR stand for in the context of credit cards?
Annual Percentage Rate
ExplanationThe annual cost of borrowing expressed as a percentage of the loan amount.
#2
6. What is the purpose of a credit limit on a credit card?
To control spending and manage risk
ExplanationIt sets a cap on how much can be borrowed, reducing the risk for the lender and helping the borrower manage debt.
#3
11. What does the term 'Cash Advance' refer to on a credit card?
Withdrawing cash using the credit card
ExplanationIt allows cardholders to withdraw cash from an ATM or bank using their credit card, typically incurring high fees and interest.
#4
16. What is the significance of the 'Credit Card Grace Period'?
The period during which no interest is charged on new purchases
ExplanationIt offers a window of time after the billing cycle closes during which no interest is charged on new transactions if the previous balance is paid in full.
#5
21. What is the meaning of 'Credit Utilization Ratio' on a credit card?
The ratio of available credit to the outstanding balance
ExplanationIt's the proportion of the credit limit being used, with lower ratios generally indicating responsible borrowing behavior.
#6
2. What is the grace period on a credit card statement?
The time given to repay the minimum balance without interest
ExplanationA period during which no interest is charged on purchases if the balance is paid in full by the due date.
#7
3. What is the purpose of the CVV (Card Verification Value) on a credit card?
To authorize online transactions
ExplanationA security feature used to verify that the card is in the possession of the cardholder during online transactions.
#8
7. How does the utilization ratio impact a credit score?
Lower utilization ratio positively affects the credit score
ExplanationIt indicates responsible credit usage, which is a factor in credit score calculations.
#9
8. What is the purpose of the 'Available Credit' on a credit card statement?
The credit limit minus the outstanding balance
ExplanationThe amount of credit that is currently unused and available for borrowing.
#10
12. How does the 'Introductory APR' differ from the regular APR?
Introductory APR is lower for a limited period
ExplanationIt's a lower interest rate offered for a specified period when opening a new credit card account.
#11
4. What does 'Minimum Payment Due' represent on a credit card statement?
The smallest amount you can pay to avoid late fees
ExplanationThe minimum amount required to keep the account in good standing and avoid penalties.
#12
5. How does the credit card billing cycle affect interest charges?
Billing cycle does not impact interest charges
ExplanationInterest charges are typically based on the average daily balance over the billing cycle.
#13
9. How does a balance transfer affect credit card debt?
Transfers the debt to a new card with lower interest
ExplanationIt allows the borrower to move debt from one card to another, often with a promotional interest rate.
#14
10. What is the significance of the 'Statement Closing Date' on a credit card?
The end date of the billing cycle for that statement
ExplanationIt marks the end of the period for which transactions are included in a billing statement.
#15
14. How does the 'Credit Limit Increase' request impact credit card usage?
It allows for larger transactions within the limit
ExplanationIt provides the cardholder with more available credit, potentially improving their credit utilization ratio.