Credit cards are unquestionably convenient, and surveys show their use is on the rise. Yet many people don’t fully understand the potential consequences of using credit cards, or they maybe confused about the differences between credit and debit cards.

Recent legislation provides greater protection to credit card holders. For instance, the Credit Card Accountability, Responsibility and Disclosure Act of 2009 (often referred to just as CARD) restricts the fees and penalties that banks and other card issuers can charge, and the law also requires that consumer disclosures be presented in ”plain English.”

Credit cards can be hazardous to your financial health. Running up a large balance or missing payments will hurt your credit score. Yet many credit cards let you earn points or rewards that can translate into benefits such as free air travel, discounted hotel stays, and other perks. If you pay off your entire balance on time each month, such cards can be a good deal.

Use this quiz to test your basic knowledge about credit cards.


1)   Under CARD, issuers that want to raise the interest they charge must notify cardholders at least_ in advance.

  1. 30days
  2. 45 days
  3. six months
  4. one year


2)   Under CARD, payments from cardholders are due_ from your statement’s mailing date.

  1. 14 days
  2. 21 days
  3. 30 days
  4.  six months


3)   If you’re charged different interest rates on different segments of your balance and you make a payment that exceeds the minimum, the issuer:

  1. can apply the excess to any part of your balance
  2. must apply the excess to the oldest portion first
  3. must apply the excess to the part of the balance with the highest interest rate
  4. must apply the excess to the part of the balance with the lowest interest rate


4)   When must a credit card issuer disclose the terms of your account?

  1. at anytime
  2. before you open the account
  3. after you open the account
  4. The issuer doesn’t have to disclose the terms.


5)   Which of the following statements about credit card issuers is true?

  1. They aren’t governed by federal laws.
  2. They aren’t governed by state laws.
  3. They can’t assess interest charges without prior notification.
  4. They are required to make credit contracts accessible online.


6)   For federal tax purposes, the interest paid on credit card purchases is:

  1. generally deductible
  2. generally not deductible
  3. always deductible
  4. never deductible


7)   What is an advantage that debit cards have over credit cards?

  1. They offer greater legal protection on purchases.
  2. They carry lower interest rates.
  3. They may deter overspending because your available funds are immediately reduced by the amount of your purchase.
  4. They provide higher federal income tax deductions.