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Credit Card Company 12 Months Interest

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					    Making Decisions
   About Credit Cards

http://www.manteno.k12.il.us/webquest/middle/Math/DecisionsAboutCredit/WebQue
stTemp2.htm
       The Introduction
Credit cards are great to use when you do not have enough
money to purchase what you need or want.



However, credit cards can be deceiving if you do not
understand how they work.



The credit card company adds a finance charge to the unpaid
balance. This finance charge is the interest you pay the
company for borrowing their money.
                 Your Job
  Figure out which credit
card would offer you the
best terms. You should
already be familiar with the
following terms: annual fee,
interest rate, and minimum
monthly payment. You will be
creating a Hyper Studio or
PowerPoint slide show
presentation for your final
project in this unit.
               Your Task

Suppose you are planning to purchase a computer for
$1849.97 (total cost). You will be making this
purchase on a credit card, but you need to research
first to find out what credit card will offer you the
best terms. This card will not be used for any other
purchases, and you will not be paying the purchase
off right away. You will be financing it over four
months. You need to choose three credit cards,
research each one, and complete the following tables
to determine which card will save you the most
money. This project involves using the Internet to
research three different credit cards.
The Three Credit Cards:

                        Credit Card                            Credit
                                       Credit Card 2
                        1                                      Card 3
Card Name
                           Visa          Mastercard            Visa (for
                                                               students)

Minimum Monthly
Payment                  $27.08              $14.98            $10.00
Monthly Interest Rate       0%                2.9%             22.9%
                        **All of theses rates are based on credit scores
                        and are for a 6 month introductory period**
            Credit Card #1
September   Interest Rate              0%
            Minimum Pay                $27.08
 October    Interest Rate              0%
            Minimum Pay                $27.08
            Interest Rate              0%
November
            Minimum Pay                $27.08
            Interest Rate              0%
December
            Minimum Pay                $27.08
            Interest Rate              0%
 January    Minimum Pay                $27.08

                 **There is no annual fee for this card
                 Credit Card #2
September        Interest Rate                  2.9%
                 Minimum Pay                    $14.98
 October         Interest Rate                  2.9%
                 Minimum Pay                    $14.98
                 Interest Rate                  2.9%
November
                 Minimum Pay                    $14.98
                 Interest Rate                  2.9%
December
                 Minimum Pay                    $14.98
                 Interest Rate                  2.9%
 January         Minimum Pay                    $14.98

       **There is no annual fee for this card
            Credit Card #3
September   Interest Rate             22.9%
            Minimum Pay               $10.00
 October    Interest Rate             22.9%
            Minimum Pay               $10.00
            Interest Rate             22.9%
November
            Minimum Pay               $10.00
            Interest Rate             22.9%
December
            Minimum Pay               $10.00
            Interest Rate             22.9%
 January    Minimum Pay               $10.00

                **There is no annual fee for this card
                     Review Questions:
1.        Is it practical for you to pay your entire balance up front in cash or to
          finance it? Explain.
     1.      It is not realistic to pay your entire balance up front. That is why there is
             credit cards to help people buy the things they need and still be able to pay
             for it over time.
2.        Name at least three advantages of using a credit card.
     1.      Get what you want when you want it
     2.      More convenient than carrying cash
     3.      Builds good credit
3.        Name at least three disadvantages of using a credit card.
     1.      Very Tempting
     2.      The balance
     3.      The monthly bills
4.        If you only pay the minimum monthly payment plus interest each month,
          will the computer be paid off at the end of January on any of the three
          credit cards? Do not forget any annual fees.
     1.      NO WAY!!
5.        Which card offers the best terms or saves you the most on finance
          charges? Explain.
     1.      Being that all the cards have introductory rates and advatages all of these
             cards are great because the balance will be paid off in four months. If the
             computer could not be paid off the best card would be the first Visa because
             there is a 0% interest rate.
  Review Questions Continued:

6. Explain how credit cards work.
      1. Credit cards when approved are mailed to you in the mail. After you
      call the number and activate it is used just like cash. You have a balance
      that you can use. There is a finance charge on all credit cards for the
      convenience of its use. Every month there is a minimum payment that
      must be paid. Depending on the credit card interest rates are
      calculated differently when many different terms.
7. What is interest?
      1. Interest is a charge for borrowed money generally a percentage of
      the amount borrowed.
8. How do you convert the APR into the monthly interest rate?
      1. APR is converted into monthly interest rate by taking the total
      amount owed on the card and multiplying it by the interest rate. They
      then divide it by 12 months to get the finance charge. APR stands for
      annual percentage rate.

				
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