Question

A young college student was making a purchase at her local department store. The clerk suggested that she would get an additional 15% off the purchase price if she would sign up for a store credit card. Which of the following statements discusses how a personal finance expert might view this incentive?
a. Reports indicate that students are particularly vulnerable to these tactics. If you fail to pay off the balance, you end up paying much more than the original purchase price for your items.
b. An expert would advise you that the more credit cards you hold, the better your credit rating will be with the three major credit rating companies. Actuaries average the opinions of each credit card company to determine your score.
c. A personal finance expert would encourage her to take the incentive, particularly if interest rates on the card remain below 20%.
d. A personal finance expert would advise a college student to always take this incentive seriously because it is like trade credit for businesses

Answer 1

Answer: a. Reports indicate that students are particularly vulnerable to these tactics. If you fail to pay off the balance, you end up paying much more than the original purchase price for your items.

Explanation:

Even though financial advice is usually tailormade for the individual, a financial expert would most likely give this advice to a student because students are indeed vulnerable to such tactics.

They would be more prone to spend more in the store as a result of the credit card and this will lead to them being unable to pay off balances which will then lead to them paying much more than the original price they would have paid.