Cards & Payments Concepts knowledge in Cards & Payments in banking

1. Failure to pay a Credit Card on time can cause which of the following to happen? (Check all that Apply)

The cardholders credit score will go up

The cardholders monthly payments will increase

The cardholders credit score could go down

The cardholder will be charged late fees

2. True or false: If a Credit Card bill is paid in full, on time, every month, no interest will apply

TRUE

FALSE, you will be charged interest on the outstanding balance of your account

True, unless you take a cash advance

False, banks can add interest fees at their discretion

3. How is interest calculated on a credit card?

APR (Annualised Payment Rate) is the annual interest rate divided by 365 (the number of days in a year) which equals the daily interest rate

The Daily interest charge is the current balance multiplied by the interest rate set by the Scheme Issuer and acquirer

The daily interest rate is multiplied by your outstanding balance, and added to your balance the next day

A and C are known as ‘compounding’ interest, and form the basis of credit card interest calculations

4. How many digits are embossed on the front of standard EMV Credit/Debit Card?

14 digits

15 digits

16 digits

17 digits

5. What advice should you give a customer when asked how much they should pay on their Credit Card?

They should pay only the minimum payment, each month

They are legally required to pay the balance in full before the grace period ends

They should pay as much as you can, striving to pay more than the minimum payment if possibble

They should pay the interest and fees plus 10% of the principle

6. When a Credit line is reduced by an anticipated purchase this is known as

A discounted payment

Credit blocking

A payday loan

A chargeback

7. Which of the following statements about an individuals credit record, is/are False

A potential employer may ask to see your credit record

If you take adverse action against an individual based on information in a consumer report, you must tell them

The credit bureau determines whether you will get credit or not

Insurance companies may review your credit record

8. A poor Credit score could affect

Future employment

The interest rate paid on a loan

The ability to borrow

All of the above

9. You can stretch out the repayments on a student loan, if you arrange

A loan consolidation

A Discount Loan

A balloon payment

A wage earner plan

10. A credit scoring model is (choose the best answer that applies)

A score of between 0 and 100, as determined by FICO, Equifax and other global rating agencies

A mathematical model used to estimate the probability that a particular customer will default on their credit obligations

A highly accurate method to determine whether a customer will pay their bills on time

A mechanism used by banks to exclude high risk customers from acquiring credit

11. Adding someone to Your Credit Card account as an authorized user in an effort to raise their Credit score is …

Called ‘piggybacking’, and may be used to help boost the credit score of a child, spouse, or other person who has new or tarnished credit

Impossible. credit scores don’t work that way

Legal. but only in countries that recognise community property states

Possible, but best left to certified financial planners, since it employs arbitraged hedge funds

12. Which impact is the most likely outcome when cancelling a credit card?

A credit score is likely to rise; credit scoring algorythms recognize this as responsible behavior and reward it

A credit score is likely to fall, as responsible credit card management is a key indicator in overall creditworthiness

Canceling a credit card has no impact on a credit score

The bank may repossess your car or your firstborn child

13. What term best describes a Credit Card? Choose the answer that best fits

Your worst nightmare

A device by which a bank extends you an instant loan, which you agree to pay over a period

A plastic device with a magnetic stripe or embedded chip that consumers can use to pay for purchases directly from their checking accounts

The instruments through which the trilateral commission drains the wealth of nations into the hands of just a few members of their secret society

14. Given a lost or stolen card, potential losses with a Debit card are usually

Covered by insurance

Greater than with a credit card

The same as with a credit card

Less than with a credit card

15. Who assumes primary liability for the consumer’s debt incurred by use of the card?

The card issuer

The card acquirer

The card scheme

All of the Above

16. Using the simple interest method calculation, interest is

Based on the outstanding loan balance

Deducted from the initial amount borrowed

Prepaid

Added to the initial amount borrowed

17. One difference between a Debit card and a Credit Card is that

Debit cards can only be used for large transactions

Debit cards generate unsecured debt

Payments made with a debit card are immediately deducted from a bank account

Debit cards provide better consumer protection

18. What role do Card Schemes (like Visa or MasterCard) play in Credit Card purchases?

They encourage consumers to borrow on credit cards, because the government believes that freely flowing credit is good for the country

They allow consumers to borrow money to make credit card transactions

They provide processing networks that authorize and settle transactions

They are voluntary associations using copyright free trademarks to establish international branding and marketing in a web 30 paradigm

19. Can a Credit Card issuer change your interest rate at any time for any reason?

No, thanks to a landmark 1987 U.S Supreme Court ruling In Re: Ferguson vs. Chase Manhatten & others

Yes, but only after going gaining the approval of the regulator

Yes, only after giving consumers 15 days’ notice

No, the issuer is bound by the terms of the contract, just like the consumer

20. Which of the following is NOT a factor in Your Credit score?

Your payment history

Your borrowing history

The amounts owed

None of the Above

21. Which of the following methods for calculating interest on an outstanding balance usually produces the lowest overall interest payment for a stated contract rate?

Discount interest method

Simple interest method

Rule of 78

Add-on interest method

22. On a variable rate Credit Card, the interest rate is calculated by

Factoring the Collatoral, the Principle and the Late Fee

Adding the Prime interest rate plus the reserve bank cost of funds rate

The Annual Percentage Rate divided by 365

The prime rate plus the Bank margin rate

23. An Affinity card (Check all that Apply)

Can only be used in a local area

Can only be used at the sponsor’s store

Carries the name or banding of the sponsoring organization

Is a card issued in conjunction with an organisation or collective group; for example a church or community group

24. Which statement best describes a Cash Advance

An amount credited to the customers current account, based on their loyalty

An amount debited to the customers current account, based on their loyalty

A sum of cash advanced by the bank in the absence of proper identification, because the bank knows the customer well

An amount advanced by an ATM (or bank teller) to a card holder against the cardholder’s pre-approved limit

25. A significant drawback associated with using a Credit Card is

One has the right to return any merchandise purchased with a Credit Card within 30 days of the purchase

One can easily incur debt at higher interest rates

Ones losses are limited to $50 if the card is lost or stolen

The interest paid is an allowable deduction on income tax

26. When referring to Credit Card Interest, what do the letters APR stand for?

Accelerated Percentage Rate

Average percentage rate

Anticipated performance rate

Annual percentage rate

27. Credit blocking occurs when

You return merchandise

A line of credit is reduced by the estimated cost of an anticipated purchase

When lenders are blocked from collecting your credit balance

When you are denied a credit card

28. What do we mean by the term Zombie debt?

Debts that follows you and from which you cannot escape

“Dead” debts that continue to be in force and cannot be eliminated

Old debts (eg. Credit Cards) that are beyond the statute of limitations

Old debts (eg. Credit Cards) that are in limbo pending a decision from a court

29. A revolving Credit account is…

An equity account

An installment loan account

A closed-end account

An open-end account

30. What is a secured Credit Card?

A card guaranteed against fraud

A card that cannot be stolen because you wear it on a keychain

A virtual card account number that you can use to shop online

A card whose credit limits are set by the cash security held when the card account was opened

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