MaLh 1030 CredlL Card uebL AsslgnmenL name _________________________________

You have received your monthly credit card statement and must now deal with the financial realities of last months
blrLhday celebraLlon. Whlle your mllesLone ln years was deservlng of a celebraLlon, deallng wlLh Lhe $2000 ln credlL card
charges wlll requlre some plannlng.
?our credlL card sLaLemenL llsLs Lhe A8 (Annual ercenLage 8aLe) for your balance Lo be 14.3. 1hls ls Lhe yearly
lnLeresL raLe Lhe credlL card company uses ln calculaLlng lnLeresL due on your balance. 1he credlL card company
compounds lnLeresL monLhly. ?our monLhly lnLeresL raLe on credlL card charges wlll be:
0.145
0.012083
12 12
APR
i
1he mlnlmum paymenL requlred by your credlL card company ls $23/monLh. Assumlng LhaL you do noL make any new
charges Lo your accounL, answer Lhe followlng quesLlons Lo help you deLermlne Lhe besL plan for paylng off Lhls credlL
card debL.
1. To begin with, lets check out the plan of only paying the minimum amount due each month. To get a feel for how
Lhls wlll affecL Lhe balance, flnlsh fllllng ln Lhe followlng Lable uslng Lhe mlnlmum monLhly paymenL of $23.
MonLh Cld 8alance lnLeresL aymenL new 8alance
1 $2000.00 $24.17 $23.00 $1999.17
2 $1999.17
3
4
3
6
7
8
9
10
11
12

WhaL ls Lhe LoLal amounL LhaL has been pald Lo Lhe credlL card company aL Lhe end of Lhe flrsL year?


Pow much of Lhe orlglnal balance has been pald off aL Lhe end of Lhe flrsL year?


lrom looklng aL Lhe new balances over Lhe flrsL year, how many years do you Lhlnk lL wlll Lake Lo pay off Lhe $2000?
(1hls ls a guess so Lhere ls no wrong answer. 8efore golng on Lo sLep 2, wrlLe down your besL esLlmaLe.)


$24.16 $25 $1998.33
$1998.33 $24.15 $25
$25
$25
$25
$25
$25
$25
$25
$25
$25
$1997.48
$1997.48 $24.14 $1996.62
$1996.62 $24.13 $1995.75
$1995.75 $24.11 $1994.86
$1994.86 $24.10 $1993.96
$1993.96 $24.09 $1993.05
$1993.05 $24.08 $1992.13
$1992.13 $24.07 $1991.20
$1991.20 $24.06 $1990.26
$1990.26 $24.05 $1989.31
$300
$10.69
100 Years?
MaLh 1030 CredlL Card uebL AsslgnmenL name _________________________________

2. A formula for calculaLlng Lhe paymenL, P , requlred Lo pay off a debL of amounL Dln M monLhs wlLh monLhly
lnLeresL raLe i ls


uslng Lhls formula, solve for M Lo deLermlne Lhe number of monLhs lL wlll Lake Lo pay off Lhe $2000 credlL card debL
wlLh mlnlmum monLhly paymenLs of $23. 8ound Lhe number of monLhs Lo Lwo declmal places. (ALLach all work for Lhls
asslgnmenL Lo Lhe end.)


Pow long ls Lhls ln years, rounded Lo Lhe nearesL LenLh of a year?

WhaL ls Lhe LoLal amounL pald Lo Lhe credlL card company, rounded Lo Lhe nearesL dollar?


3. Pow many monLhs wlll be requlred Lo pay off Lhe debL lf you pay $30 each monLh? 8ound Lo Lwo declmal places.


Pow long ls Lhls ln years, rounded Lo Lhe nearesL LenLh of a year?

WhaL ls Lhe LoLal amounL pald Lo Lhe credlL card company, rounded Lo Lhe nearesL dollar?


4. Pow many monLhs wlll be requlred Lo pay off Lhe debL lf you pay $73 each monLh? 8ound Lo Lwo declmal places.


Pow long ls Lhls ln years, rounded Lo Lhe nearesL LenLh of a year?

WhaL ls Lhe LoLal amounL pald Lo Lhe credlL card company, rounded Lo Lhe nearesL dollar?

1 1
M
D i
P
i

23.6 Years
$7,078
283.12 Months
54.98 Months
4.6 Years
$2,749
32.38 Months
2.7 Years
$2,429
MaLh 1030 CredlL Card uebL AsslgnmenL name _________________________________

3. Pow large would your monLhly paymenL have Lo be ln order Lo pay off your debL ln 12 monLhs? 8ound !" Lo Lhe nexL
nearesL cenL.



WhaL ls Lhe LoLal amounL pald Lo Lhe credlL card company, rounded Lo Lhe nearesL dollar?


6. WhaL ls Lhe besL plan for paylng off Lhe $2000? Why?



WhaL ls Lhe worsL plan? Why?



WhaL should you do lf you cannoL afford Lo make Lhe paymenLs requlred by Lhe besL plan?



7. WhaL are Lwo Lhlngs LhaL Lhe average consumer can learn by compleLlng Lhls asslgnmenL?
l.


ll.


$180.04
$2,161
The best plan for paying off the $2,000 is to pay as much as possible a month. From the examples
that we used, paying $180 a month would be the best because in the long run you dont pay as much
because the faster you pay it off the less interest can rack up.
The worst plan by far would be to make minimum payments and end up paying over 6 times the
original cost.
Examine your budget and pay the most you can into it so that you pay less in interest.
Do NOT just make the minimum payments on your credit card or you will end up paying
much more than you anticipated in the rst place.
Look at your nances and budget the most that you can put into paying off your debt so that
you dont end up paying as much in interest. OR just dont get into debt in the rst place.