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Which factor would most likely lead to an increase in the interest rate on a person's credit card?

1) High credit score
2) Low credit utilization
3) Late or missed payments
4) Low debt-to-income ratio

1 Answer

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Final answer:

An increase in the interest rate on a credit card is most likely due to late or missed payments, indicating a higher risk to the lender. Maintaining a good payment history can prevent higher rates, while a high credit score, low credit utilization, and low debt-to-income ratio usually lead to lower rates. The correct option is 3) Late or missed payments

Step-by-step explanation:

The factor that would most likely lead to an increase in the interest rate on a person's credit card is late or missed payments. A credit card's interest rate is essentially the cost of borrowing money, and it is determined by several factors, including the borrower's risk level. A credit card issuer may see late or missed payments as a sign of increased risk. Consequently, they may raise the interest rate to offset the increased chance of not being repaid on time or in full. In contrast, a high credit score, low credit utilization, and low debt-to-income ratio are all positive factors that are typically associated with lower interest rates.

An interest rate adjustment can be a costly consequence of financial mismanagement. It's important to understand that maintaining a good payment history can prevent such increases. To avoid additional fees and increased interest rates, a cardholder should aim to always pay their balance on time. The correct option is 3) Late or missed payments

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