Quiz: Do You Know How Your Credit Card Works?

1. Are there any costs to taking a cash advance on my credit card? Yes.

As soon as you obtain cash back on your credit card, your financial institution starts charging you interest and may charge you a cash advance fee. The interest rate for a cash advance is often higher than it is for regular purchases with a credit card. Depending on your credit card issuer, the cash advance fee may be a fixed amount per transaction, a percentage of the advance, or both. You must read your credit card agreement to understand the fees associated with cash advances.

2. True or false: It’s OK to share your PIN with people you trust. False.

If the PIN is used for unauthorized transactions and you have shared your PIN with anyone (even with your spouse), you will lose the fraud protection your financial institution otherwise must provide.

3. I can buy lots on my credit card and at the end of the month I only have to pay the minimum amount. That’s a good thing, right? Wrong.

By paying only the minimum amount you could spend years paying off the debt that may double (or worse) in that time, due to accumulated interest charges. Your best strategy is to pay off the full balance owing on your credit card bill each month. Try the Financial Consumer Agency of Canada’s (FCAC’s) credit card payment calculator to see how expensive only paying the minimum amount can be.

4. There are so many credit cards out there. How do I know which one to pick?

You can use FCAC’s credit card selector tool. This interactive tool lets you compare the features and costs of over 250 credit cards to help you find a credit card that suits your lifestyle and budget.

Source: www.newscanada.com