Ati is applying for her first credit card and is reading up on them. Identify the correct statement with respect to credit cards.
Select one:
a. A prestige credit card usually charges an annual fee
b. A proprietary card usually offers extra benefits to cardholders for a fee
c. A secured credit card is usually issued to students
d. A retail card usually charges a lower interest rate than a regular or prestige card
The correct answer and explanation is:
The correct answer is a. A prestige credit card usually charges an annual fee.
Explanation:
Prestige credit cards are premium credit cards that offer a wide range of exclusive benefits, such as access to VIP lounges, travel insurance, concierge services, and higher credit limits. To maintain these premium features, these cards typically charge an annual fee, which can be quite high compared to other types of credit cards. This fee covers the cost of the added services and benefits that are provided to cardholders. The more exclusive the benefits, the higher the annual fee tends to be.
- Proprietary card: This type of card is issued by a particular company or retailer, and it usually focuses on offering specific benefits related to the retailer, such as discounts or special deals. It can be offered for a fee, but the extra benefits are generally limited to a particular retailer or brand, and not all proprietary cards charge a fee.
- Secured credit card: Secured credit cards are often issued to individuals with little or no credit history. These cards require a deposit as collateral, which serves as the credit limit. They are commonly issued to people looking to build or rebuild credit, including students. However, the primary purpose is not specific to students, so this option is misleading.
- Retail card: Retail cards are credit cards issued by specific stores or chains, often with perks like discounts on purchases made at that retailer. They may offer lower interest rates for store-specific purchases, but in general, their interest rates are higher than those of regular or prestige cards when used outside of the store. They are not known for having lower rates overall.
Thus, a is the most accurate statement in this context.