Credit Card Basics
What is a credit card?
A card that lets you borrow money from a bank to make purchases, with the agreement to pay it back later.
Name one advantage of using a credit card.
Convenience, rewards, building credit history, or protection against fraud.
What does APR stand for?
Annual Percentage Rate.
What does it mean if someone says they are “drowning in debt”?
They owe so much money that they can’t manage it.
True or False: A credit card lets you borrow money from the bank.
True.
Name one disadvantage of using a credit card.
High-interest debt, overspending, late fees, or damage to credit score.
True or False: APR includes both interest and fees.
True.
If someone “maxes out their credit card,” what happened?
They used up the entire credit limit.
What’s the main difference between a debit card and a credit card?
Debit uses your own money from your bank account; credit borrows money from the bank.
What is one way responsible credit card use can improve your financial future?
It builds a positive credit history, making it easier to get loans or mortgages.
If your APR is 40%, what does that mean?
You’ll pay 40% interest yearly on balances you don’t pay in full.
What does the phrase “in the red” mean when talking about finances?
Owing money; having negative account balance or debt.
What happens if you don’t pay your full credit card balance each month?
You’re charged interest (and possibly late fees).
Why can paying only the minimum payment every month be dangerous?
Because most of the balance remains, interest keeps adding up, and debt grows.
Which group is more affected by high APR: people who pay in full or those who carry a balance?
Those who carry a balance.
What does the phrase “easy come, easy go” mean when talking about money or credit cards?
Money that’s quickly earned or borrowed (like with credit) is often quickly spent.
What is a “minimum payment”?
The smallest amount you must pay each month to avoid default.
How can credit card companies encourage overspending through rewards programs?
By offering points, miles, or cashback, which can tempt people to buy more than they can afford.
If you owe $1,000 and your APR is 36%, how much interest will you roughly pay in one year if you make no payments?
About $360 in interest.
What is a “debt trap” in the context of credit cards?
A situation where minimum payments and high interest make it very hard to escape debt.