#1
What is the Annual Percentage Rate (APR) on a credit card?
The interest rate charged on the outstanding balance
ExplanationAPR is the interest rate on the remaining balance.
#2
What is the grace period on a credit card?
The period during which you can make purchases without being charged interest
ExplanationGrace period allows interest-free purchases.
#3
What is a credit limit on a credit card?
The maximum amount of money you can spend using the card
ExplanationCredit limit sets the spending cap.
#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
ExplanationMinimum payment prevents penalties but may not clear debt.
#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.
ExplanationCredit card offers borrowing; debit uses direct funds.
#6
What is a credit card issuer?
A financial institution that provides credit cards to consumers
ExplanationIssuer provides credit cards to consumers.
#7
How is compound interest calculated on credit card balances?
Interest is calculated on both the principal amount and any accrued interest
ExplanationCompound interest applies to principal and accrued interest.
#8
What is the effect of making only the minimum payment on a credit card balance?
It extends the repayment period and increases the total interest paid
ExplanationMinimum payments prolong repayment and raise total interest.
#9
What is a penalty APR on a credit card?
An increase in the interest rate applied to the card balance, often triggered by late payments
ExplanationPenalty APR raises interest rates for late payments.
#10
How does a credit card issuer calculate the minimum payment amount?
By multiplying the balance by a fixed percentage
ExplanationMinimum payment calculated as a percentage of the balance.
#11
What is the purpose of a credit card payment due date?
To specify the deadline for making payments without penalty
ExplanationDue date sets payment deadline to avoid penalties.
#12
What are credit card rewards?
Benefits or incentives offered by credit card issuers for using the card, such as cash back or airline miles
ExplanationRewards are incentives for credit card usage.
#13
What is a balance transfer on a credit card?
Transferring a balance from one credit card to another, often to take advantage of lower interest rates
ExplanationMoving debt from one card to another for lower rates.
#14
What is the purpose of a credit card statement?
To provide a summary of transactions and balances during a billing cycle
ExplanationStatement summarizes billing cycle transactions and balances.
#15
What is the impact of a high credit card utilization ratio?
It can negatively impact the credit score
ExplanationHigh utilization ratio harms credit score.
#16
What is the impact of closing a credit card account?
It can decrease credit score
ExplanationClosing account may lower credit score.
#17
What is the purpose of a credit card minimum payment?
To avoid late fees and penalties
ExplanationMinimum payment prevents late fees and penalties.