The Using Consumer Credit Worksheet is designed to test a student’s understanding of credit card interest rates and how to use credit calculations for various purchases.
1. Calculate the following using the Bankrate calculator at:
Credit Card Balance Interest Rate Minimum/Fixed Payment Number of Months to Pay in Full Total Interest Paid
$5,000 13% Minimum
$5,000 18% Minimum
$2,000 15% Fixed $50
$2,000 15% Fixed $100
• Minimum in this example should be Interest plus 1% of balance, and it will then default to a $15 minimum.
2. When making the minimum payment, how much more interest do you pay when the interest rate is 18% rather than 13%?
3. In the fixed rate example, how much would you save by doubling the fixed payment to $100 a month instead of $50 per month?
4. Assume you have a friend who is making the minimum monthly payments on a credit card. Your friend asks your thoughts on what he 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.
5. Calculate the cost of credit using the following formulas. Show your calculations.
Simple Interest: You borrow $2,000 for car repairs. The interest rate is 5%, and you will pay it in full one year later.
Simple Interest on the Declining Balance: You borrow $2,000 for car repairs. The interest rate is 5% and you will make two equal payments over a year (for example, half in January, and half in July)
Answer each of the following questions in 50-100 words each:
6. Grayson just received his credit card statement. He noticed a charge for $40 to a store he has never patronized. What steps should he take to handle this?
7. List the advantages and disadvantages of using credit. Provide at least two of each
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