Question

edpuzzle: credit card debt explained
as youve seen, college students use credit cards for a wide variety of purchases. but what
happens if they (or anyone) spend way too much using credit? watch this video and follow your
teachers directions to answer the questions either in your student activity packet or within the
edpuzzle itself.

1. which best describes how a credit card works?

a. the credit card company extends you a line of credit. you then pay a small
percentage of the cost of those purchases in one annual payment.
b. the credit card company extends you a line of credit. you purchase \stuff\ and the
purchase gets directly paid with funds in your checking account.
c. the credit card company extends you a line of credit. this is free money that you can
use to purchase the \stuff\ that you need.
d. the credit card company extends you a line of credit. you purchase \stuff\ and then
have the choice to pay the balance in full or a minimum payment each month.

1. what is the advantage of paying your credit card balance in full each month?

a. you will incur only a small \paid in full\ fee on your next credit card statement
b. you pay only a small amount of interest
c. you have less of your credit limit available; therefore, less temptation to spend
d. you avoid paying any interest and fees

1. what is an outstanding balance?

a. the amount you paid in your minimum payment
b. the amount you spent in total
c. the amount you still owe after you have made your most recent payment
d. the amount you still have available in your line of credit

1. why is it more difficult to get out of debt when only paying the minimum payment?

a. your entire minimum payment goes toward principal and the interest continues to
compound
b. the majority of your minimum payment is going toward interest / finance charges
and only a small amount toward the principal
c. your credit limit always resets, so you have a lot of spending power each month

1. the video advises you to \be a deadbeat.\ what does that mean?

a. pay your credit card bill in full and on time every single month, thus paying no
interest or fees
b. make the minimum payment on your credit card on time each month
c. never open a line of credit so the credit card companies do not make any money

Explanation:

1. Credit card companies offer a line of credit. When you use it, you can choose to pay the full balance or a minimum monthly payment. Option d correctly describes this.
2. Paying the credit card balance in full each month means you avoid interest and fees. Option d is correct.
3. An outstanding balance is the amount you still owe after making payments. Option c is correct.
4. When only paying the minimum, most of the payment goes to interest/finance charges (compounding debt). Option b is correct.
5. "Be a deadbeat" in this context means paying the bill in full and on time (avoiding interest/fees). Option a is correct.

Answer:

1. d. The credit card company extends you a line of credit. You purchase "stuff" and then have the choice to pay the balance in full or a minimum payment each month.
2. d. You avoid paying any interest and fees.
3. c. The amount you still owe after you have made your most recent payment.
4. b. The majority of your minimum payment is going toward interest / finance charges and only a small amount toward the principal.
5. a. Pay your credit card bill in full and on time every single month, thus paying no interest or fees.