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Exam 8: Managing Your Credit

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Question 31

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Which of the following is not a method by which financial institutions calculate finance charges on credit cards?

A) Previous balance method
B) Ending balance method
C) Average daily balance method
D) Adjusted balance method

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Question 32

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Prestige cards may charge higher annual fees, but offer extra benefits such as access to private jet programs and concierge service at hotels.

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Question 33

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"Wise" use of credit cards includes

Which of the following is not true regarding cash advances on credit cards?

Assuming you were charged simple interest of 5% on a loan of $1,000 that requires you to repay in two payments, one at the end of the first six months and one at the end of the second six months, total payments on the loan would be

Which of the following methods of calculating finance charges on credit cards is least favorable to the cardholder?

Credit card companies offer many incentives, such as airline miles and bonuses to get you to use their cards.

Sandy had a beginning balance on her MasterCard statement of $300. This month she had purchases of $400, payments of $300, and a $100 cash advance. To avoid interest charges, Sandy must make a payment of

It is not difficult to find a credit card company that is eager to extend credit to you.

Why is it important to carefully consider your credit cards when developing a budget, financial plan and personal financial objectives?

In applying for a credit card, the potential creditor will look at your ________ to determine if you have funds to cover future debt payments if necessary.

As of November 14, Ben has an outstanding credit card balance of $1,100 from purchases made over the past month. The new billing period begins on November 15. Assume Ben's outstanding balance for the first 15 days of this new billing period (Nov. 15-29) is $1,100. Then on November 29, the financial institution receives a payment of $600 from Ben, reducing his balance to $500. This is the balance for the remaining 15 days. Using the adjusted balance method and a monthly interest rate of 2.5%, Ben's finance charge would be

When using credit cards, there is no way to keep track of individual expenditures.

As of November 14, Ben has an outstanding credit card balance of $1,100 from purchases made over the past month. The new billing period begins on November 15. Assume Ben's outstanding balance for the first 15 days of this new billing period (Nov. 15-29) is $1,100. Then on November 29, the financial institution receives a payment of $600 from Ben, reducing his balance to $500. This is the balance for the remaining 15 days. Using the average daily balance method and a monthly interest rate of 2.5%, Ben's finance charge would be

Which of the following may not be a feature of some credit cards?

If you have exhausted all efforts to resolve an excessive credit card balance, personal bankruptcy may be your only option.

A credit card whose interest rate changes as a specific market interest rate changes is said to have a

A self-imposed credit limit indicates that you will use a credit card only if you will have the cash to cover the payment when you receive your credit card statement.

Which of the following statements is not true of prepaid cards?

The annual percentage rate (APR) is useful because it allows you to easily compare financing costs among various possible creditors.