credit cards practice unit 8 lesson 3
1. What is a credit card?
- A credit card is a plastic card issued by a financial institution that allows the cardholder to borrow funds to make purchases or pay for services.
2. How does a credit card work?
- A credit card allows the cardholder to make purchases on credit, up to a predetermined credit limit. The cardholder is required to repay the borrowed amount, along with any accrued interest, by the due date on the monthly statement.
3. What are the benefits of using a credit card?
- Some benefits of using a credit card include convenience, building credit history, earning rewards or cash back on purchases, and providing a safety net for emergencies.
4. What are the potential drawbacks of using a credit card?
- Potential drawbacks of using a credit card include high-interest rates, fees for late payments or exceeding the credit limit, the temptation to overspend, and potential damage to credit score if payments are not made on time.
5. How can you manage your credit card effectively?
- To manage a credit card effectively, it is important to pay the full balance on time each month to avoid accruing interest. It is also important to stay within the credit limit, monitor spending habits, and review monthly statements for any unauthorized charges.