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# 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?

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

Minimum/Fixed Payment

Number of Months to Pay in Full

Total Interest Paid

Impact   of Interest Rates

\$5,000

13%

Minimum   (interest+1% of balance)

\$5,000

18%

Minimum   (interest+1% of balance)

Impact   of Payment Amounts

\$2,000

15%

Minimum   (interest+1% of balance)

\$2,000

15%

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.

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.