Cards & Payments Concepts knowledge

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

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

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

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

Yes, only after giving consumers 15 days’ notice

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

Debit cards generate unsecured debt

Payments made with a debit card are usually deducted immediately

Debit cards can only be used for large transactions

Debit cards provide better consumer protection

3. Using the simple interest method calculation, interest is

Added to the initial amount borrowed

Prepaid

Based on the outstanding loan balance

Deducted from the initial amount borrowed

4. Which statement best describes a Cash Advance

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

An amount credited 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

5. You can increase Your Credit score if you

Successfully manage several types of credit

Make additional credit inquiries

Borrow more

Have a history of late payments

6. 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 should pay the interest and fees plus 10% of the principle

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

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

A chargeback

A payday loan

Credit blocking

A discounted payment

8. Which method for calculating interest on an outstanding balance usually produces the lowest overall interest payment for a stated contract rate?

Simple interest method

Discount interest method

Rule of 78

Add-on interest method

9. A poor Credit score could affect

All of the above

The interest rate paid on a loan

The ability to borrow

Future employment

10. An Affinity card (Check all that Apply)

Is often issued in partnership with an organisation or collective group; for example a church, club or community group

Often carries the name or brand of the sponsoring organisation

Can only be used at the sponsor’s store

Can only be used in a local area

11. 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

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

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

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

12. 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

False, banks can add interest fees at their discretion

True, unless you take a cash advance

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

The card scheme

The card acquirer

All of the Above

The card issuer

14. A revolving Credit account is…

A closed-end account

An open-end account

An installment loan account

An equity account

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

Less than with a credit card

The same as with a credit card

Covered by insurance

Greater than with a credit card

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

The bank may repossess your car or your firstborn child

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

17. How many digits are embossed on the front of a standard Visa and Mastercard Credit/Debit Card?

15 digits

14 digits

16 digits

17 digits

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

A balloon payment

A Discount Loan

A loan consolidation

A wage earner plan

19. ONE significant drawback associated with using a Credit Card is

One can easily incur debt at higher interest rates

The interest paid is an allowable deduction on income tax

One can return any merchandise purchased with a Credit Card within 30 days of the purchase

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

20. Which of the following are NOT taken into account when calculating your Credit score?

The amounts owed

Your borrowing history

None of the Above

Your payment history

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

Impossible. credit scores don’t work that way

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

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

Legal. but only in countries that recognise community property states

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

“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

Debts that follows you and from which you cannot escape

23. What is the best way to improve Your Credit score?

Make credit card payments on time, every month

Only use Visa or Mastercard branded credit cards

Destroy your credit cards and use cash

Apply for more Credit Cards

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

Factoring the Collatoral, the Principle and the Late Fee

Dividing the Annual Percentage Rate by the number of days in a year (365)

The prime rate plus the Bank margin rate

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

25. 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

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

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

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

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

Your worst nightmare

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

They provide processing networks that authorize and settle transactions

They allow consumers to borrow money to make credit card transactions

29. Credit blocking occurs when

When lenders are blocked from collecting your credit balance

You return merchandise

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

When you are denied a credit card

30. What is a secured Credit Card?

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

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

A card guaranteed against fraud

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

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