Which of the following is true about credit cards? A) when you use one, the money is taken directly from your bank account B) they usually charge a lower interest rate than debit cards C) they are issued by networks such as visa D) you can run up huge debt if you don’t pay the balance off quickly
Which of the following is true about credit cards? A) when you use one, the money is taken directly from your bank account B) they usually charge a lower interest rate than debit cards C) they are issued by networks such as visa D) you can run up huge debt if you don’t pay the balance off quickly
Essentials Of Investments
11th Edition
ISBN:9781260013924
Author:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Publisher:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Chapter1: Investments: Background And Issues
Section: Chapter Questions
Problem 1PS
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Which of the following is true about credit cards?
A) when you use one, the money is taken directly from your bank account
B) they usually charge a lower interest rate than debit cards
C) they are issued by networks such as visa
D) you can run up huge debt if you don’t pay the balance off quickly
Expert Solution
Step 1
A) False. When you use a credit card, the money is not taken directly from your bank account. Instead, the credit card issuer lends you the money to make the purchase, and you are required to pay back the money later, usually with interest.
B) False. Credit cards typically charge higher interest rates than debit cards. The interest rate charged on a credit card varies depending on the issuer, the type of card, and the cardholder's creditworthiness, but it is generally higher than the interest rate charged on a typical debit card. This is because credit cards are a form of unsecured debt, while debit cards are tied directly to the funds in your bank account.
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