15 May WHAT WILL BE YOUR ADVICE ON THE USE OF CREDIT CARDS FOR THE HYPOTHETICAL SITUATIONS OF YOUR PEERS?
Credit card debt is a reality for many of us in today’s world. Suppose you have a
balance of $5,270.00 on a credit card with an annual percentage rate (APR) of 15%.
Most credit cards require that you pay a minimum monthly payment of 2% of the
balance.Based upon a balance of $5,270.00, the minimum monthly payment (assuming no
other fees are being applied) will be $105.40. Of this amount, only $65.88 goes
toward the principal and pays down what you owe. The remaining amount ($39.52) is
the interest you pay to the credit card company.Therefore, if you pay only $105.40 a
month, it will take you 28.2 years to pay off a debt of $5270.00. During that time,
you will pay the credit card company $7,967.76 in interest! Understanding this basic
fact of credit card debt is important for your future financial security. You can
find details of the above calculations in the lecture material of this module.For
this assignment, assume that you have a credit card from the hypothetical Big Bank.
Pick an imaginary outstanding balance. Then, answer the following:What will be the
minimum monthly payment of your outstanding balance if the APR is 18% and it
requires a minimum monthly payment of 3%?How much of the payment each month will go
toward the principal?How much of the payment each month will go to interest?How long
will it take to pay off your debt if you pay only the minimum payments?
You can also use an online calculator like the following:
Bankrate.com. (2012). Credit card calculator: The true cost of paying the minimum.
Retrieved
from.bankrate.com/calculators/managing-debt/minimum-payment-calculator.aspxWhat”>http://www.bankrate.com/calculators/managing-debt/minimum-payment-calculator.aspxWhat
steps can you take to pay off this credit card debt fast?Write your initial response
in a minimum of 200 words. Apply APA standards to citation of sources.By Saturday,
May 21, 2016, review the postings of your peers and respond to at least two of them.
Consider commenting on the following:Many Americans amass large amounts of credit
card debts at an early age. What will be your advice on the use of credit cards for
the hypothetical situations of your peers?
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