Final answer:
A credit card with different limits based on the applicant's age reflects age-based lending limits and demonstrates one way credit card companies assess risk. The cost of borrowing on credit cards is encapsulated in the interest rate, which can be a significant expense for those who carry a balance.
Step-by-step explanation:
A lender offering a credit card with a limit of $750 for applicants aged 21 through 30 and $1,500 for applicants over age 30 is an example of age-based lending limits. Credit card companies have various strategies to assess risk and to assign credit limits.
This case demonstrates the use of age as a factor in determining the amount of credit that will be extended to the applicant, which is influenced by assumptions about income, spending patterns, and financial responsibility associated with different age groups.
Credit cards are a form of borrowing where the card issuer allows you to borrow money and pay it back with interest. Interest rates on credit cards are significant because they represent the cost of borrowing the money if you don't pay your balance in full every month. With a typical annual interest rate ranging from 12% to 18%, and an average of 15% per year, it represents a substantial cost for consumers who carry a balance on their cards.