Assignment: Credit Card Payments Investigation

FratBro23
Category:
Algebra
Price: $5 USD

Question description

Assignment: Credit Card Payments Investigation 

Part I

You and Khianna were such a help in balancing Mrs. Katz's checkbook that she has called again. A few months ago, she received a new credit card and now she is a bit confused about how the interest and minimum payments are calculated. Mrs. Katz wants you to help figure out her monthly payments.

Review the example below and then help Khianna compute the details of Mrs. Katz’s credit card statement.  In the example shown, the credit card had an initial balance of $1000 with an annual percentage rate of 18% and a minimum payment of 3% required. The first four months of payments would be:

Month

Unpaid Balance

Finance Charge

(Unpaid Balance x APR expressed as a decimal /12)

Minimum Payment

(Unpaid Balance + Finance Charge) x 3/100

New Balance

(Unpaid Balance + Finance Charge – Payment)

1

$1000

_____

1000 – 30 = $970

2

$970

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970 + 14.55 – 29.54 = $955.01

3

$955.01

[img width="204" height="35" src="file:///C:/Users/Boss/AppData/Local/Temp/OICE_F1B910F9-295D-47F8-A78D-EF788AC91C87.0/msohtmlclip1/01/clip_image010.gif" v:shapes="_x0000_i1029">

955.01 + 14.32 – 29. 08 = $940.26

4

$940.26

[img width="205" height="35" src="file:///C:/Users/Boss/AppData/Local/Temp/OICE_F1B910F9-295D-47F8-A78D-EF788AC91C87.0/msohtmlclip1/01/clip_image014.gif" v:shapes="_x0000_i1031">

940.25 + 14.10 – 28.63 = $925.73

Mrs. Katz had an initial balance of $1000, an annual percentage rate (APR) of 20%, and required minimum payments of 2%.  Help Mrs. Katz calculate her unpaid balance, finance charge, and minimum payments for the next six months.

Month

Unpaid Balance

(Balance – Payment)

Finance Charge

(Unpaid Balance x APR/12 expressed as a decimal)

Minimum Payment

(Unpaid Balance + Finance Charge) x 2/100

New Balance

(Unpaid Balance + Finance Charge – Payment)

1

$1000

_____

2

3

4

5

6

Part II

Did you know? By paying only the minimum amount due on a credit card, it takes years to pay off initial expenses and people end up paying almost double the cost of the items purchased.  Take a moment to think about Mrs. Katz’s options.  Use what you have learned to answer the following questions.

  1.  Mrs. Katz could have saved money for her new computer rather than buying it on a credit card. What would have been the difference in the amount of time to pay for the computer and the amount of money ultimately spent?

  2.  What is the difference between paying for something with a debit card vs. a credit card?


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