How much interest are you paying on your credit cards? How much are you actually paying when you charge something to a credit card? You are not using your own financial information in this assignment, but it is designed to demonstrate your understanding of the cost of credit.
Review your Week 3 Learning Activities, especially Focus on Personal Finance, Ch. 5, the Khan Academy Video Reflection, and your iGrad Credit Card Module.
Submit your assignment to the Assignment Files tab.
Review Ch. 5 of Focus on Personal Finance, your Week 3 Khan Academy Video, and your iGrad Credit Card Module for support in completing this assignment.
1. Calculate the following using the Bankrate calculator. You may use the Bankrate calculator for the remainder of the questions on this worksheet.
2. In the “Impact of Interest Rates” example, a 5% interest rate difference results in how much extra interest paid when making only a required minimum monthly payment equal to the monthly interest, plus 1% of the outstanding balance?
3. In the “Impact of Payment Amounts” example, how much total interest would you save by making a fixed payment of $100 per month instead of the required minimum payment equal to the monthly interest, plus 1% of the outstanding balance?
4. How much quicker would you be able to pay off the $2,000 credit card balance by making a fixed payment of $100 each month instead of the required minimum payment?
5. Assume you have a friend who is making the minimum monthly payments on a credit card. Your friend asks your thoughts on what he or she is doing. Based on these calculations and what you have learned, how would you advise your friend about making only minimum payments? Your response should be at least 100 words.
6. The chart above looks at paying off a credit card balance and assumes you will not be using it while paying it down. In these minimum payment examples the balance decreases by only 1% each month. Most of us will use credit cards throughout the year, and that means we may carry a balance past the grace period. Assuming you were trying to pay off the balance while still using the card, what actions must you take? Your response should be at least 100 words.
7. What recommendations would you make in regards to properly managing credit card usage and repayment? Your response should be at least 100 words.
8. Which one of these two card options would you choose for your personal use? Provide support for your decision, considering which three attributes are most important to you and trade-offs that you are willing to accept. Your response should be at least 100 words.
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