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Introducing the Credit Card: Answer Guide

Exercise 3: Do credit cards have fees?

  • 1. What does APR stand for?
    1. Annual purchase rate
    2. Annual percentage rate
    3. Approximate payment rotation
    4. Authorization processing rate
  • 2. Which fees do all credit cards have?
    1. Annual fees
    2. Over-the-limit fees
    3. Foreign transaction fees.
    4. Some credit cards have no fees at all.
  • 3. When do you have to pay a cash advance fee?
    1. When you move a balance from one card to another
    2. When you do not make your payments on time
    3. When you spend more than your limit on a card
    4. When you withdraw money from an ATM
  • 4. If a card has a $2,400 balance and a minimum payment of 4%, what would you need to pay to keep your card in good standing? Assume that there are no other fees involved.
    1. $40
    2. $24
    3. $96
    4. $240
  • Explanation: 4% of $2,400 = .04 x $2,400 = $96
  • 5. What would be the approximate one-month interest be for a $5,000 credit card balance with a 12% APR?
    1. $120
    2. $600
    3. $500
    4. $50
  • Explanation: 12% APR represents a year, or 12 months of interest. 1 month of interest would be approximately 1/12 of that.
    12% / 12 = 1%
    1% of $5,000 = .01 x $5,000 = $50

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