Quiz reveals tips on how to manage your credit
Published 8:24 pm Monday, April 27, 2009
What’s better, a low interest rate or generous rewards points? Does it matter where you use your credit card, or is it how much you debt you have available that’s important? Take this short quiz and find out some important information about using and managing your credit cards.
1. What’s more important for your credit score?
a) Your payment history
b) How many credit cards you have
c) How long you’ve had your cards
d) How many times you’ve applied for credit cards
2. True or false: Studies have shown that people spend more when they use credit cards than when they’re shopping with cash.
a) True
b) False
3. The typical American carries a balance of $3,000 in credit card debt. If you make no more charges and pay only the minimum payment due each month, how long will it take to pay that debt off at 10 percent interest?
a) 2 years
b) 8 years
c) 18 years
d) 29 years
4. Once you open an account with a certain interest rate, the bank may raise that rate:
a) If you miss a payment on that card
b) If you miss a payment on another card or loan
c) If you lose your job
d) At any time
5. True or false: Credit card issuers always give you a “grace period” to pay your purchase in full before finance charges are applied.
a) True
b) False
6. If you pay off the balance on a high-interest credit card, the best thing to do is:
a) Close the account
b) Leave the account open but don’t use it again
c) Leave the account open and use it once in a while
d) Charge up the balance again
7. True or false: You can judge whether banks think you’re a good credit risk by the number of credit card offers you receive in the mail.
8. Rewards or points on your credit card are a good deal only if:
a) You get free airline tickets
b) You get cash back
c) You carry no balance on the card
d) The card has no annual fee
9. Credit card issuers look at the following when deciding whether to change your credit limit:
a) Your payment history
b) The limits on other cards you hold
c) The types of places you use your card
d) All of the above
10. How is the interest charged on your account each month calculated?
a) The annual percentage rate (APR), multiplied by your balance
b) APR divided by 12 months, multiplied by your balance
c) APR multiplied by your new charges
d) APR multiplied by the balance left unpaid the prior month
Answers
1. (a) Paying your bills on time accounts for 35 percent of your score.
2. (a) True. It’s tougher to take cash out of your wallet.
3. (c) With an initial minimum payment of 2 percent, or $60 per month, it will take just over 18 years, with some $1,935 in interest charges.
4. (d) Banks can change your interest rate for any reason at any time.
5. (b) False. While credit card issuers are legally allowed to wait 25 days before charging interest, it is becoming more common to reduce or eliminate these periods.
6. (c) Paying off a balance and then using a card occasionally will provide the biggest boost for your credit score. If you close the account, particularly if it’s one you’ve had for a long time, your credit score may go down.
7. False. The offers that come in the mail are based on a range of different factors, like what magazines you subscribe to.
8. (c) It is worthwhile to chase rewards points if you carry no balance on the card, because the rewards cards typically charge higher interest rates.
9. (d) Banks will look not only at your payment history and total available credit, but also your money spending habits.
10. (b) The method used to figure the amount that rate is applied varies, but is usually based on your unpaid balance plus new charges, minus payments.
Score Card
If your score is between 0-3
Learn more about using the credit cards you hold and track your credit score and you’ll likely save money in the future.
If your score is between 4-7
You’ve got the basics down, but you could benefit by keeping on top of credit card trends.
If your score is between 8-10
You’ve got a clean credit report — but make sure you use this knowledge to your advantage by managing your cards wisely.
