Credit Questions

1. List and explain 3 advantages and 3 disadvantages of using credit. Advantages: Financial Emergencies: In the event of an emergency, where an individual needs to buy something of importance and they do not have available cash, they can use a credit card to purchase their products and technically pay for it later. Purchase Protection: If someone has misplaced or had something stolen from them and they need to prove that they purchased it, both the individual and the credit card company can prove it with a receipt. Develop a Credit Line: If an individual keeps their credit score under control and they stay up to date with paying back what they have borrowed, they can then be eligible to obtain a loan when the time arises. Disadvantages: Credit Card Fraud: A credit card can be physically stolen and the card number can be stolen, sometimes off of a receipt or something with the number visible. High Interest Rates: If the interest rates are too high, it can be very easy to fall behind on payments and eventually an individual may even become in debt. Going Over Ones Budget: By spending the money that an individual does not have access to can very easily allow the credit card company to take over and leave the individual in debt for a very long time. 2. Define these types of credit cards:

Bank Cards: A card issued by the bank for the purpose of identifying a customer at an automated teller machine or in a bank. Travel and Entertainment Cards: These cards provide a budget for traveling and entertaining expenses incurred as part of an individuals normal business routine; travel and entertainment cards can ultimately cover the costs of all meals, accommodations, travel, and other expenses. House Cards: An In-house credit card is a private labeled credit card premeditated to provide specific benefits to customers coming to do business at a bank tied to the company that issued the In-house card. Affinity Cards: Affinity cards are credit/charge cards that can offer additional reimbursements as a result of being allotted to individuals by banks in partnership with other establishments.

3. The numbers on the face of the credit card represent certain things. The system followed by most credit card companies is shown below. What is meant by the system number (the first set of numbers on the card)? The first 6 digits depicted on the front of a credit card number (including the initial MII digit) form the issuer identifier, which represents the category of entity which initially distributed

the credit card; this then means that the total number of possible issuers is approximately one million due to the possible combinations of six digits.
4. How much is the credit card holder liable for in the case of credit card fraud? If an individual has been victimized of identity theft through the use of a credit card, they are then automatically liable to obtain a maximum amount of $50 per account that has been considered fraud. 5. Define each of the following terms associated with credit cards:

Annual Fee: An annual fee is the amount a company charges just for an individual to use the card that the organization has distributed; the cost of annual fee can vary between different organizations. Finance Charge: A finance charge is the cost for using a specific credit card, comprised of interest costs and other fees; such charges as the interest added to a balance, service fees for transactions, late fees, and balance transfer fees are examples. 6. Give examples of each of the following types of credit cards:

Bank Cards: TD Canada Trust Bank Card. Travel and Entertainment Cards: J.P. Morgan Chase & Co. Card House Cards: Capitol One In-House Credit Card Affinity Cards: BMO Bank Of Montreal Affinity Card

7. List and explain 2 factors used to determine whether or not you qualify for a credit card?

An individual can qualify for a credit card if they are of a certain specified adult age, depending on the specific region of the inhabitant. An individual must have some source of income because it would be highly unlikely for a credit card company to distribute a credit card to an individual that has no possible way of paying off their credit bills.

8. Explain what a "credit score" is? Give the approximate breakdown of how the credit score is calculated. A credit score is a numerical expression based on a statistical examination of an individuals credit archives to determine the eligibility of a person to obtain a credit card. A credit score is predominantly centred on credit report evidence. Credit Score Breakdown: 35 percent of the score is based on ones payment history. 30 percent of the score is based on any outstanding debt. 15 percent of the score is based on the period of time an individual has owned a credit card. 10 percent of the score is based on new credit. 10 percent of the score is based on the types of credit an individual may currently have.

9. How can one improve their credit score?

Pay the bills on time Keep credit balances low on credit cards Don't open unnecessary credit cards Responsibly maintain each credit card Be aware of the dos and donts of credit cards