Credit cards - Finance Quiz #1

What are credit cards used for?

Smaller things - food, clothes, etc.

What should you not use a credit card for?

A loan, because credit cards offer the highest interest rates.

Credit card vs. debit card

Credit card - borrows money from the credit card company, offers rewards, no interest as long as paid back in full.

Debit card - withdraws money from your checking account.

What is an APR?

Interest rate plus other mandatory fees.

Difference between student credit cards and regular credit cards

Student credit cards - lower credit limits, lower required credit scores, different ways of defining income. Rewards system focused on simple necessities - food, streaming services, gas.

Student credit card requirements

18 years of age, enrolled in college/university, proof of income.

How to build a good credit score

Always make the minimum payments, pay in full whenever possible.

What is a credit limit?

The highest amount of money you can borrow.

What is a balance transfer card?

Allows you to move existing debt to a new card to take advantage of the lower interest rates.

FICO credit score

15% - Length of credit history (keep old credit active).
35% - Payment history (Pay on time, never miss payments).

30% - Amounts owed (Keep % of available credit used low).

10% - New credit (Don’t apply for many new cards/loans).

10% - Types of credit (Use both revolving & installment loans).

Revolving credit

Credit card feature

Installment loans

Fixed monthly payments that include principal and monthly payment until the loan is paid in full.

How is the credit score computed?

A major delinquency has a 93% negative impact.

Bad records stay on score for 7 years.

What are the 3 major credit bureaus?

TransUnion, Experian, Equifax