How do they work?
Why do you use credit cards and how can you use them?
Use credit cards to make transactions for goods and services
Can use them in person, over the phone, or online
What is interest?
Interest is the money someone will have to pay if they do not pay the credit card balance in full by the specified due date. This indicates that someone will have to pay interest till the balance is fully paid off.
What does a credit score show?
Shows how well you manage credit and how risky it would be for a lender to lend you money.
What is a credit limit?
The max line of credit that a 'lender' will give you.
Does credit or debit cards allow you to borrow money from the card issuer up to a certain limit in order to purchase items or withdraw cash?
Credit Cards
Why should you keep your receipts?
It is important to keep receipts of purchases to make sure there are no mistakes. If there is, it is important to immediately contact the financial institution.
Where does it state how much interest you have to pay?
In your credit card statement, it clearly states the interest rate you will pay.
Can you get points from using credit cards?
You get points if you use your credit responsibly.
Why do you need to be aware of your credit limit?
You need to be aware about the amount of money you can spend at a time.
Do you have to pay a bill to the bank when using a debit card?
There is no bill to pay later because it is coming straight out of your checkings account from the money you have made.
What is the risk of having a credit card?
Overspending on your credit card or going over your limit consistently can lead to a poor credit score.
What happens if you do not pay the required minimum monthly payment?
If you do not pay your required minimum monthly payment by the specified due date, your interest rate can increase.
Can your credit score be calculated? If so, how?
Your credit score is calculated using a formula based on your credit report.
Limits are determined by income, debt, length of credit history, credit score, etc.
What is the main difference between credit and debit cards?
Debit cards spend money directly from your account (checking or savings). Credit cards allow you to pay the bill at a different time than spending.
List 3/4 of the benefits of having a credit card.
- build a credit score
- earn rewards
- increase purchasing power
- spendings are not linked to a savings or chequings account
Why might lenders raise your interest rate?
Lenders may raise interest rates if history shows you go over the credit limit consistently.
Why is it good to build your credit score?
You can build a credit score - this will benefit you when you make large purchases and you can qualify for lower mortgage rates.
How do you max out your credit card?
By spending as much as your limit. This will max it out. You should stay 30% or under your credit limit.
Why are credit cards "safer" to use than debit cards?
Credit cards offer better consumer protections than debit cards against fraud. If your debit card falls into the wrong hands, your debit card fraud protection isn't as strong as a credit card.
What is a balance transfer?
Paying off the balance from your current credit card by transferring it to a new credit card that usually has a lower rate. Usually, you will have to pay a balance transfer fee in order to transfer to another credit card.
How will interest rates vary?
Interest rates will vary depending on the type of transaction and the financial institution (this indicates you could be spending a different amount on regular purchases and cash advances or cash-like transactions)
How can your credit score go up or down?
Your credit score can go down if you have late or missed payments, changes to your credit utilization rate (how much you currently owe divided by your credit limit), a change in your credit mix (types of different credit accounts you have – mortgages, loans, credit cards, etc), closing older accounts (which may shorten your length of credit history overall), or applying for new credit accounts.
What are over-the-limit fees?
it is your responsibility to stay within your limit as your financial institution won't inform you if you are going over.
True or false. For a debit card, although you cannot build a debit score, you can easily earn rewards, spend money directly from your account, and no bill has to be paid to the bank because it is all coming from your account.
False. Everything is correct except it is extremely hard to earn rewards from a debit card.