Do You Use Credit Wisely? Try Our Quiz and See
Credit cards are used in roughly 300 transactions every second in the United States--ringing up about $600 billion in purchases each year.
The average American household has 10 credit cards and carries a combined balance of $2,889, according to Ram Research Corp. in Frederick, Md.
Yet most Americans remain surprisingly ignorant about many of the rules and regulations that govern credit card purchases, agreements and credit reports. How much do you know? Take this quiz and see.
1. The most important factor when choosing a credit card is:
a) The interest rate.
b) The annual fee.
c) The frequent-flier miles.
d) All of the above.
e) It depends on how I will use the card.
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2. If an issuer wants to change the rate on my fixed-rate credit card, it can if:
a) I agree.
b) I am given 15 days’ notice.
c) The rate was just a teaser.
d) It cancels my old card and issues a new one.
e) It can’t change the rate. It’s like a fixed-rate mortgage: Once the issuer agrees to it, it’s the same rate for as long as I hold the card.
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3. If my card is stolen or used without my authorization, the maximum amount I can be held liable for is:
a) $50 b) $5 c) $10 d) $100 e) $0
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4. You are legally entitled to dispute a purchase for quality reasons if the bill has not been paid, the charge was more than $50 and the purchase was made:
a) Anywhere in the world.
b) In the United States.
c) In your home state.
d) In your home state or within 100 miles of your home.
e) More than 100 miles from your home.
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5. A credit card company can report you to a credit bureau after your payment is:
a) More than 30 days delinquent.
b) More than 60 days delinquent.
c) As little as one day delinquent.
d) Uncollectible.
e) Made with an out-of-state check.
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6. How long would it take to pay off a $1,700 credit card debt by making only the minimum payment? (This assumes an 18% annual rate and minimum payments that amount to 2.5% of the balance owed--a fairly standard arrangement.)
a) 5 years and 11 months
b) 11 years and 5 months
c) 13 years and 10 months
d) 15 years and 3 months
e) 8 years and 9 months
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7. The cardholder in the above example would pay how much in interest (in addition to the $1,700 principal balance), assuming she made only the minimum monthly payments?
a) $753 b) $2,547 c) $462 d) $1,973 e) $226
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8. If the cardholder in the above examples paid $10 a month more than the minimum due, she’d save how much in interest charges and pay off the debt how many years faster.
a) $1,319; 10 years
b) $799; 5 years
c) $469; 7 years
d) $2,371; 20 years
e) $674; 8 years
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9. If there is an inaccurate charge on my bill and I dispute it in writing within 60 days of receiving the bill, the credit card company:
a) Cannot report the amount in question as delinquent to a credit bureau until the dispute is settled.
b) Must acknowledge the dispute within 30 days; investigate the matter and report back to me within 90 days or risk losing a portion of the disputed amount, regardless of whether it was truly owed.
c) Must provide me, if I ask for it, with proof--such as a signed credit card slip--that the charge was correct.
d) All of the above.
e) Can ignore me completely.
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10. If I dispute an inaccurate item on my credit report, the reporting company must:
a) Investigate the claim and remove the inaccurate item within a reasonable period.
b) Investigate the claim and remove the inaccurate item within 30 days.
c) Investigate the claim and remove the inaccurate item within 90 days.
d) Place an asterisk next to the inaccurate item to indicate that it has been disputed.
e) Include written statements from me and from the creditor with any credit report, explaining both sides of the story.
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11. True or false: Credit card companies offer a grace period on all new purchases--usually 25 days before interest begins to accrue--regardless of whether I carry a balance.
a) True.
b) False. On most cards, the grace period only applies if I pay off the balance each month.
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12. True or false: There’s no downside to accepting the pre-approved credit cards I get in the mail, assuming they don’t charge annual fees.
a) True. I could have a gazillion cards (and thousands of dollars in available credit) stuffed in my sock drawer. As long as I don’t use the cards, they’re free. So why not?
b) False. They may not cost me anything, but if I went to apply for a mortgage or personal loan, the unused credit cards could hurt my chances of getting the loan I want. That’s because lenders look at your “available credit”--whether it’s used or not--when considering whether or not you’re overextended.
Key: 1) e; 2) b; 3) a; 4) d; 5) c; 6) c; 7) d; 8) a; 9) d; 10) a; 11) b; 12) b.
If you checked nine or more correct answers, you’re a financial prodigy. Pat yourself on the back. If you missed more than half, you could probably save money, time and irritation by learning more about credit.
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Where to Find Out More
Looking for more information about credit? Here are some sources of fairly low-cost information:
The Consumer Information Center publishes pamphlets and booklets on finding, applying for and using credit cards. Some options:
* “The Cards You Choose Can Save You Money.” Cost: 50 cents. Item #387B.
* “Choosing and Using Credit Cards.” Cost: 50 cents. Item #354B.
* “Lost or Stolen Credit and ATM Cards.” Cost: 50 cents. Item No. 359B.
To order, send your name, address and check or money order to R. Woods, Consumer Information Center, Pueblo, CO 81009. Be sure to include the publication name and item number.
Bankcard Holders of America puts out about 30 publications, ranging in cost from $1 to $5, that advise consumers on everything from where to find low-rate credit cards to providing a breakdown of consumer credit rights and programs to get out of debt. For a listing of what is available and what it costs, send a request for the publications list to Bankcard Holders of America, Customer Relations/Membership Services, 524 Branch Drive, Salem, VA 24153.
Consumer Loan Advocates offers a compendium of applicable credit laws and published government information on a computer disk. The software, titled “The Complete Credit Reference 1995,” costs $11.45, including shipping and handling. Write to 655 Rockland Road, Suite 106, Lake Bluff, IL 60044. Or phone (708) 615-0024.
Ram Research puts out a monthly newsletter called CardTrak that lists the nation’s lowest-cost credit cards. A copy costs $5; subscriptions are $59 a year. To order, send a check or money order to CardTrak, P.O. Box 1700, Frederick, MD 21702.
Kathy M. Kristof welcomes your comments and suggestions for columns but regrets that she cannot respond individually to letters and phone calls. Write to Personal Finance, Los Angeles Times, Times Mirror Square, Los Angeles, CA 90053, or message kristof@news.latimes.com on the Internet.
