Credit Card Lab Reflection

The project displayed below is titled, “Credit Card lab 2.0.” This project simulates paying

off an overdue balance on a credit card, and requires you to compute the best way to do so. First,

the act of plugging in numbers and simple division are used to find the monthly interest rate.

Next, the monthly interest rate is used to find Ik , or the interest charged on the original balance

for the kth month; this is found by multiplying the total amount of remaining credit card debt by

the interest rate. After this, Bk is found, which is the total balance plus the interest rate of the kth

month minus the monthly payment. All of this is done to calculate how much of the original

balance would be paid off at the end of the first year, if the only payments made were the

minimum required amount.

Parts II through V use a formula for calculating the payment (P) required to pay off the

debt in M months with the monthly interest rate. Log is used to create a formula to find M, which

is then used to determine the number of months required to pay off the debt with monthly

payments of $25, $50, and $75 respectively. Finally, the formula for P is used to determine how

large of a payment is needed to pay off the debt in 12 months.

I definitely think that, yes, this project demonstrates how math can be applied to the real

world. Many of us have and will probably use credit or debit cards in our lifetime, and paying off

credit card debt isn’t an uncommon issue. Some of us may have to someday pay off credit card

debt, and knowing the best way to do that will be incredibly important.

There are so many other instances in which this type of math could be applicable.

Instances where monthly payments are required to eventually pay off a much larger sum—such

as student loans, mortgage payments, car payments, insurance payments, etc. By using this math,

you could determine the best way to efficiently pay off those larger sums in the way which
would be most beneficial to yourself. This math could be incredibly helpful to virtually anyone,

and that’s why it would be important for a financial advisor to be able to explain the details of

this math and how it works. That way, anyone who needed it could have access to it.

This assignment did not change my opinion on the usefulness of math, but instead

furthered my previous opinion on it. I’ve always considered math to be a very useful tool, even

in the real world. It’s utilized for practically everything, from technology to architecture, and

without it the world would be a very different place. This project reminded me that anyone can

use math in their day-to-day life. Even math as simple as this can drastically improve someone’s

life and make their financial choices much smarter and easier.

According to the lab, the “best” plan, or most money-wise plan, is to pay off the debt

within 12 months; this will limit the amount of interest that accumulates because of how quickly

the debt is paid off. But because it’s being paid off quicker, that also means the monthly

payments are quite a bit more than they would otherwise be over a longer period of time. For

some people, higher monthly payments might be inefficient or even impossible, and they may

need to pay off their debt over a longer period of time. If this is the case, it would be best to

calculate how much they could comfortably pay each month without endangering their other

finances. Just paying the minimum monthly payments is the worst approach to paying off debt,

as it allows the most interest to accumulate and can drastically increase the total amount paid.