Question 1

Using your credit card for a cash advance in an emergency is probably a good idea.Using cash advances for non-emergencies is a terrible idea.Explain the characteristics that make cash advances very dangerous.

Accepted Answer

The answer of Using your credit card for a cash...

Question 2

Your credit card company is required to send you a notice ________ before they can increase your interest rate,change certain fees (such as annual fees,cash advance fees,and late fees),or make other significant changes to the terms of your card.

Accepted Answer

According to the Truth in Lending Act, credit card companies are required to give a notice of at least 45 days before making significant changes to the terms of the card. This gives the cardholder enough time to assess the impact of the changes and decide whether to continue using the card or switch to a different one.

Question 3

Bradley currently has a Visa card from his bank with the following terms: 21 percent on purchases, 25 percent on cash advances with a 3 percent cash-advance fee on the amount, and a default or penalty rate of 33 percent. His current statement shows a balance of $9,000. Lately, he has been having a hard time paying more than the minimum payment of 3 percent of his balance.
-What is the current APY on this credit card?

Accepted Answer

The APY (Annual Percentage Yield) takes into account the effect of compounding interest. For a 21% nominal interest rate compounded monthly, the APY is calculated as (1 + 0.21/12)^12 - 1, which equals approximately 23.14%.

Question 4

Monty currently has a Visa card from his bank with the following terms: 18% on purchases, 24% on cash advances with a 4% cash advance fee on the amount, and a default or penalty rate of 36%. His current statement shows a balance of $6,000. So far he has only taken one cash advance, withdrawing $1,000 from a casino in Las Vegas a year ago, which he has already paid off. Lately he has been having a hard time paying more than the minimum payment of 4% of his balance. The only assets he owns are a seven-year-old car and a $2,500 certificate of deposit that has a 5% APR.
-What is the current APY on this credit card?

Accepted Answer

The correct answer is D: 19.56%. The annual percentage yield (APY) is the effective interest rate that takes into account the effect of compounding. The APY for this credit card is calculated as follows:APY = (1 + (APR / 12))^12 - 1= (1 + (0.18 / 12))^12 - 1= 0.1956 or 19.56%

Question 5

Monty currently has a Visa card from his bank with the following terms: 18% on purchases, 24% on cash advances with a 4% cash advance fee on the amount, and a default or penalty rate of 36%. His current statement shows a balance of $6,000. So far he has only taken one cash advance, withdrawing $1,000 from a casino in Las Vegas a year ago, which he has already paid off. Lately he has been having a hard time paying more than the minimum payment of 4% of his balance. The only assets he owns are a seven-year-old car and a $2,500 certificate of deposit that has a 5% APR.
-It is now three months later and Monty has missed two payments in a row and he is now paying the default or penalty rate on his balance.How much interest per month will Monty be accruing on his unpaid balance?

Accepted Answer

The answer of Monty currently has a Visa card from...

Question 6

Teaser rates are very low.How long do they last? Is there any real benefit in them?

Accepted Answer

The answer of Teaser rates are very low.How long do...

Question 7

List the three primary methods used to determine interest charges on an unpaid credit card balance.

Accepted Answer

The answer of List the three primary methods used to...

Question 8

The Credit Card Accountability,Responsibility,and Disclosure (CARD)Act established fee caps for cards.Card fees cannot total more than ________ of the initial credit limit.

Accepted Answer

The Credit Card Accountability, Responsibility, and Disclosure (CARD) Act of 2009 established that card fees cannot total more than 25 percent of the initial credit limit during the first year of account opening. This regulation was put in place to protect consumers from excessive fees.

Question 9

Compare and contrast the average,previous,and adjusted balance methods.

Accepted Answer

The answer of Compare and contrast the average,previous,and adjusted balance...

Question 10

Your credit card company is required to send you a notice 45 days before they can increase your interest rate,change certain fees (such as annual fees,cash-advance fees,and late fees),or make other significant changes to the terms of your card.

Accepted Answer

This is mandated by the Credit Card Accountability Responsibility and Disclosure Act (CARD Act) of 2009.

Question 11

Monty currently has a Visa card from his bank with the following terms: 18% on purchases, 24% on cash advances with a 4% cash advance fee on the amount, and a default or penalty rate of 36%. His current statement shows a balance of $6,000. So far he has only taken one cash advance, withdrawing $1,000 from a casino in Las Vegas a year ago, which he has already paid off. Lately he has been having a hard time paying more than the minimum payment of 4% of his balance. The only assets he owns are a seven-year-old car and a $2,500 certificate of deposit that has a 5% APR.
-What will be Monty's minimum payment due?

Accepted Answer

The answer of Monty currently has a Visa card from...

Question 12

Monty currently has a Visa card from his bank with the following terms: 18% on purchases, 24% on cash advances with a 4% cash advance fee on the amount, and a default or penalty rate of 36%. His current statement shows a balance of $6,000. So far he has only taken one cash advance, withdrawing $1,000 from a casino in Las Vegas a year ago, which he has already paid off. Lately he has been having a hard time paying more than the minimum payment of 4% of his balance. The only assets he owns are a seven-year-old car and a $2,500 certificate of deposit that has a 5% APR.
-If Monty buys a new television for $800 this month and sends in a credit card payment of $1,200 when he gets his statement,how much interest will he pay on the television for the month?

Accepted Answer

Monty's purchase falls under the grace period, which means he will not be charged any interest if he pays off the $800 in full before his next statement due date. In addition, his payment of $1,200 exceeds the minimum payment, which will help him pay off his balance faster and avoid accumulating more interest charges in the future. The interest rate of 18% only applies if he carries a balance after the grace period, which is not the case for this scenario.

Question 13

Describe the three primary methods used to determine interest charges on an unpaid credit card balance.

Accepted Answer

The answer of Describe the three primary methods used to...

Question 14

Which of the following is an advantage of credit cards?

Accepted Answer

Credit cards provide the convenience of renting cars and making online reservations without having to pay upfront or carry cash. This can be especially useful while traveling or when making purchases online.

Question 15

Monty currently has a Visa card from his bank with the following terms: 18% on purchases, 24% on cash advances with a 4% cash advance fee on the amount, and a default or penalty rate of 36%. His current statement shows a balance of $6,000. So far he has only taken one cash advance, withdrawing $1,000 from a casino in Las Vegas a year ago, which he has already paid off. Lately he has been having a hard time paying more than the minimum payment of 4% of his balance. The only assets he owns are a seven-year-old car and a $2,500 certificate of deposit that has a 5% APR.
-When you withdraw cash from an ATM using your credit card

Accepted Answer

When you withdraw cash from an ATM using your credit card, you begin paying interest immediately. This is because cash advances on credit cards typically start accruing interest from the day of the transaction, without a grace period.

Question 16

Monty currently has a Visa card from his bank with the following terms: 18% on purchases, 24% on cash advances with a 4% cash advance fee on the amount, and a default or penalty rate of 36%. His current statement shows a balance of $6,000. So far he has only taken one cash advance, withdrawing $1,000 from a casino in Las Vegas a year ago, which he has already paid off. Lately he has been having a hard time paying more than the minimum payment of 4% of his balance. The only assets he owns are a seven-year-old car and a $2,500 certificate of deposit that has a 5% APR.
-Using the Adjusted Balance Method: If Monty sends in a payment for $1,000,how much will the finance charge be on his remaining balance? (Use the $6,000 balance for your calculations.)

Accepted Answer

The answer of Monty currently has a Visa card from...

Question 17

Bradley currently has a Visa card from his bank with the following terms: 21 percent on purchases, 25 percent on cash advances with a 3 percent cash-advance fee on the amount, and a default or penalty rate of 33 percent. His current statement shows a balance of $9,000. Lately, he has been having a hard time paying more than the minimum payment of 3 percent of his balance.
-If Bradley buys a new game console for $560 this month and sends in a credit card payment of $950 when he gets his statement,how much interest will he pay on the game console for the month?

Accepted Answer

To calculate the interest on the game console, we need to first calculate Bradley's new balance on the card after the purchase:

New balance = Current balance + Purchase amount + (Cash advance fee if applicable) - Payment
New balance = $9,000 + $560 - $0 - $950
New balance = $8,610

Since Bradley is only making the minimum payment of 3% of his balance, his interest will be calculated on the remaining balance, which is $8,610:

Interest = Balance x Monthly interest rate
Interest = $8,610 x (21% / 12)
Interest = $38.25

Therefore, Bradley will pay $38.25 in interest on the game console for the month. Option B is the correct answer.

Option A is incorrect, as it is the interest rate on purchases, not the specific interest amount Bradley will pay on the game console.

Option C is incorrect, as it is the cash advance fee percentage, which does not apply to this purchase.

Option D is incorrect, as Bradley did not pay for the game console in full during the grace period but rather made a partial payment of $950.

Question 18

Bradley currently has a Visa card from his bank with the following terms: 21 percent on purchases, 25 percent on cash advances with a 3 percent cash-advance fee on the amount, and a default or penalty rate of 33 percent. His current statement shows a balance of $9,000. Lately, he has been having a hard time paying more than the minimum payment of 3 percent of his balance.
-What is the APY on Bradley's default,or penalty,rate?

Accepted Answer

To calculate the APY on the default rate, we need to add the periodic interest rate (33%/12) to 1 and raise the result to the 12th power (since there are 12 months in a year). This gives us an APY of 38.48%. Option A is incorrect because it is only the stated default rate. Options B and D are also incorrect as they are higher than the calculated APY for the default rate.

Question 19

Monty currently has a Visa card from his bank with the following terms: 18% on purchases, 24% on cash advances with a 4% cash advance fee on the amount, and a default or penalty rate of 36%. His current statement shows a balance of $6,000. So far he has only taken one cash advance, withdrawing $1,000 from a casino in Las Vegas a year ago, which he has already paid off. Lately he has been having a hard time paying more than the minimum payment of 4% of his balance. The only assets he owns are a seven-year-old car and a $2,500 certificate of deposit that has a 5% APR.
-What advice would you give to Monty concerning his use of credit cards?

Accepted Answer

Monty needs to learn to live within his means and differentiate between wants and needs. He also needs to seek out a non-profit credit counseling company to help him manage his debt and create a payment plan.

Question 20

Monty currently has a Visa card from his bank with the following terms: 18% on purchases, 24% on cash advances with a 4% cash advance fee on the amount, and a default or penalty rate of 36%. His current statement shows a balance of $6,000. So far he has only taken one cash advance, withdrawing $1,000 from a casino in Las Vegas a year ago, which he has already paid off. Lately he has been having a hard time paying more than the minimum payment of 4% of his balance. The only assets he owns are a seven-year-old car and a $2,500 certificate of deposit that has a 5% APR.
-What is the APY on Monty's default or penalty rate?

Accepted Answer

To find the APY on Monty's default or penalty rate of 36%, we can use the formula: APY = (1 + interest rate/n)^n - 1, where n is the number of times interest is compounded. Assuming the interest is compounded monthly (12 times a year), we get: APY = (1 + 0.36/12)^12 - 1 = 0.4258 or 42.58%. Therefore, the correct answer is choice C.

As for the best choice, Monty should prioritize paying off his credit card debt as soon as possible, starting with the balances carrying the highest interest rates (i.e. cash advances and purchases). He should also try to negotiate a lower interest rate with his bank or transfer the balance to a card with a lower promotional interest rate. It is not advisable to rely on using a certificate of deposit to pay off debt, as this is essentially borrowing against his own savings and can result in penalties or fees. Selling his car may be an option if he needs additional funds to pay off his debt. Ultimately, the best choice depends on Monty's individual financial situation and goals.

Quiz 6: Using Credit Cards: The Role of Open Credit

Using your credit card for a cash advance in an emergency is probably a good idea.Using cash advances for non-emergencies is a terrible idea.Explain the characteristics that make cash advances very dangerous.

Your credit card company is required to send you a notice ________ before they can increase your interest rate,change certain fees (such as annual fees,cash advance fees,and late fees) ,or make other significant changes to the terms of your card.

Teaser rates are very low.How long do they last? Is there any real benefit in them?

List the three primary methods used to determine interest charges on an unpaid credit card balance.

The Credit Card Accountability,Responsibility,and Disclosure (CARD) Act established fee caps for cards.Card fees cannot total more than ________ of the initial credit limit.

Compare and contrast the average,previous,and adjusted balance methods.

Your credit card company is required to send you a notice 45 days before they can increase your interest rate,change certain fees (such as annual fees,cash-advance fees,and late fees),or make other significant changes to the terms of your card.

Describe the three primary methods used to determine interest charges on an unpaid credit card balance.

Which of the following is an advantage of credit cards?