FP101 r9 Using Consumer Credit Worksheet
University of Phoenix Material
Credit Card Worksheet
1. Calculate the following using the Bankrate calculator at: http://www.bankrate.com/calculators/managing-debt/minimum-payment-calculator.aspx Credit Card Balance
Interest Rate
Minimum/Fixed Payment
Number of Months to Pay in Full
Total Interest Paid
$5,000
13%
Minimum
$5,000
18%
Minimum
$2,000
15%
Fixed $50
$2,000
15%
Fixed $100
Minimum in this example should be Interest plus 1% of balance, and it will then default to a $15 minimum.
2. In the minimum payment example, a 5% interest rate difference results in how much extra interest paid? $70.83
3. In the fixed rate example, how much would you save by doubling the fixed payment to $100 a month?
With the $50 Fix payment shows 56 months and 789.93 in interest. Now by doubling the fixed payment by $100, shows 15 months to pay debt and 201.71 of interest. A total of $588.22 in savings.
4. Assume you have a friend that is making the minimum monthly payments on a credit card. Your friend asks your thoughts on what he 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.
If my friend told me he was only paying the minimum payment. I would advise him that it will take longer and much more money to pay off the card. He must stop using the card to get to a comfortable balance. Depending on far I can understand his interest on the card, I would help him on how to make a good amount of a payment to lower his debt and less amount on interest. The best thing a friend can say is, if you have the money to spend. Why not just use your debit card or cash rather than using your credit card.
5. Calculate the cost of credit using the following formulas. Show your calculations.
Simple Interest: You borrow $2,000 for car repairs. The interest rate is 5%, and you will pay it in full one year later. I will end up paying 167 a
Credit Card Worksheet
1. Calculate the following using the Bankrate calculator at: http://www.bankrate.com/calculators/managing-debt/minimum-payment-calculator.aspx Credit Card Balance
Interest Rate
Minimum/Fixed Payment
Number of Months to Pay in Full
Total Interest Paid
$5,000
13%
Minimum
$5,000
18%
Minimum
$2,000
15%
Fixed $50
$2,000
15%
Fixed $100
Minimum in this example should be Interest plus 1% of balance, and it will then default to a $15 minimum.
2. In the minimum payment example, a 5% interest rate difference results in how much extra interest paid? $70.83
3. In the fixed rate example, how much would you save by doubling the fixed payment to $100 a month?
With the $50 Fix payment shows 56 months and 789.93 in interest. Now by doubling the fixed payment by $100, shows 15 months to pay debt and 201.71 of interest. A total of $588.22 in savings.
4. Assume you have a friend that is making the minimum monthly payments on a credit card. Your friend asks your thoughts on what he 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.
If my friend told me he was only paying the minimum payment. I would advise him that it will take longer and much more money to pay off the card. He must stop using the card to get to a comfortable balance. Depending on far I can understand his interest on the card, I would help him on how to make a good amount of a payment to lower his debt and less amount on interest. The best thing a friend can say is, if you have the money to spend. Why not just use your debit card or cash rather than using your credit card.
5. Calculate the cost of credit using the following formulas. Show your calculations.
Simple Interest: You borrow $2,000 for car repairs. The interest rate is 5%, and you will pay it in full one year later. I will end up paying 167 a