The Cost of Credit Card Usage Worksheet

Anonymous
timer Asked: Dec 18th, 2018
account_balance_wallet $35

Question description

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.

Complete The Cost of Credit Card Usage Worksheet

The Cost of Credit Card Usage Worksheet FP/100 Version 1 University of Phoenix Material The Cost of Credit Card Usage Worksheet 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. Credit Card Balance Interest Rate Impact of Interest Rates $5,000 13% $5,000 18% 15% Number of Months to Pay in Full Total Interest Paid Minimum (interest+1% of balance) Minimum (interest+1% of balance) Impact of Payment Amounts $2,000 15% $2,000 Minimum/Fixed Payment Minimum (interest+1% of balance) Fixed $100 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. Copyright © 2017 by University of Phoenix. All rights reserved. 1 The Cost of Credit Card Usage Worksheet FP/100 Version 1 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. Choosing Between Credit Card Options Review the Schumer Box information provided below for two credit card options, and then answer the question that follows. Annual Percentage Rate (APR) for Purchases and Transfers APR for Cash Advances Annual Fee Transfer Fee Grace Period Late Payment Fee Rewards Program CARD DISCLOSURES Credit Card Option A 24.99%, variable Credit Card Option B 13.24%, variable 24.99%, variable $0 3% of balance transferred 20 days $25 No 23.24%, variable $59 $0 25 days $35 Yes 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. Copyright © 2017 by University of Phoenix. All rights reserved. 2

Tutor Answer

Tutorlamb
School: UIUC

Attached.

The Cost of Credit Card Usage Worksheet
FP/100 Version 1

University of Phoenix Material
The Cost of Credit Card Usage Worksheet
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.
Credit Card
Balance

Interest Rate

Impact of Interest Rates
$5,000
13%

$5,000

18%

Impact of Payment Amounts
$2,000
15%

$2,000

15%

Minimum/Fixed
Payment

Number of
Months to Pay in
Full

Total Interest
Paid

Minimum
(interest+1% of
balance)
Minimum
(interest+1% of
balance)

261

$4,938.46

273

$6,923.09

Minimum
(interest+1% of
balance)
Fixed $100

175

$1,979.20

24

$315.89

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? That is $6,923.09 minus $4,938.46 which is equal to $1,984.63.
Thus extra $1,984.63 is paid.
3. In the “Impact of Payment Amounts” example, how much total interest would you save by making a
fixed ...

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Anonymous
Good stuff. Would use again.

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