Understanding Credit Cards and Interest Quiz
Test your knowledge on credit cards. Learn about APR, grace periods, compound interest, minimum payments, rewards & more in this quiz.
#1
What is the Annual Percentage Rate (APR) on a credit card?
The interest rate charged on the outstanding balance
The fee charged for having the credit card
The maximum credit limit allowed on the card
The minimum payment required each month
#2
What is the grace period on a credit card?
The period during which you can make purchases without being charged interest
The period during which you can delay making payments without penalty
The period during which you can withdraw cash advances without fees
The period during which you can transfer balances to another card
#3
What is a credit limit on a credit card?
The maximum amount of money you can spend using the card
The interest rate charged on the card balance
The minimum payment required each month
The annual fee charged for having the card
#4
What does 'minimum payment due' mean on a credit card statement?
The least amount of money you can pay to avoid penalties, but not necessarily pay off the balance
The total balance owed on the card
The amount of money you must pay to cancel the card
The maximum amount you can pay in a billing cycle
#5
What is the difference between a credit card and a debit card?
A credit card allows you to borrow money up to a certain limit, while a debit card uses funds directly from your bank account.
A credit card has no spending limit, while a debit card has a fixed spending limit.
A credit card requires a PIN for transactions, while a debit card does not.
A credit card is linked to a savings account, while a debit card is linked to a checking account.
#6
What is a credit card issuer?
A person who uses a credit card for purchases
A financial institution that provides credit cards to consumers
A government agency that regulates credit card transactions
An individual who manages credit card accounts for others
#7
How is compound interest calculated on credit card balances?
Interest is calculated only on the principal amount
Interest is calculated on both the principal amount and any accrued interest
Interest is calculated using a fixed rate set by the government
Interest is calculated based on the cardholder's credit score
#8
What is the effect of making only the minimum payment on a credit card balance?
It reduces the interest rate applied to the balance
It increases the credit limit on the card
It extends the repayment period and increases the total interest paid
It eliminates any future interest charges on the balance
#9
What is a penalty APR on a credit card?
An additional annual fee charged for late payments
An increase in the interest rate applied to the card balance, often triggered by late payments
An option to reduce the interest rate on the card balance
A cash reward given for timely payments
#10
How does a credit card issuer calculate the minimum payment amount?
By multiplying the balance by a fixed percentage
By adding a fixed amount to the balance
By applying a variable rate based on the cardholder's income
By dividing the balance by the number of months in the billing cycle
#11
What is the purpose of a credit card payment due date?
To inform the cardholder of the maximum amount they can spend
To remind the cardholder to update their personal information
To specify the deadline for making payments without penalty
To notify the cardholder of upcoming rewards or bonuses
#12
What are credit card rewards?
Fees charged for using a credit card
Benefits or incentives offered by credit card issuers for using the card, such as cash back or airline miles
Penalties for late payments
Additional charges applied to the credit card balance
#13
What is a balance transfer on a credit card?
Transferring funds from a checking account to pay off the credit card balance
Transferring a balance from one credit card to another, often to take advantage of lower interest rates
Transferring cash from the credit card to a bank account
Transferring the responsibility of the credit card debt to another person
#14
What is the purpose of a credit card statement?
To provide a summary of transactions and balances during a billing cycle
To inform the cardholder of their credit limit
To notify the cardholder of upcoming payments
To advertise new credit card offers
#15
What is the impact of a high credit card utilization ratio?
It has no effect on the credit score
It can negatively impact the credit score
It increases the credit limit
It decreases the interest rate
#16
What is the impact of closing a credit card account?
It has no impact on credit score
It can decrease credit score
It increases credit score
It improves credit utilization ratio
#17
What is the purpose of a credit card minimum payment?
To reduce the credit card's APR
To avoid late fees and penalties
To increase the cardholder's credit limit
To transfer balances to another card
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