Consumer Credit Worksheet
Credit Cards
1. Calculate the following using the Bankrate calculator at:
https://www.bankrate.com/calculators/managing-debt/minimum-payment-calculator.aspx
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Credit Card Balance
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Interest Rate
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Minimum/Fixed Payment
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Number of Months to Pay in Full
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Total Interest Paid
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$5,000
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13%
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Minimum
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$5,000
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18%
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Minimum
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$2,000
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15%
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Fixed $50
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$2,000
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15%
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Fixed $100
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• Minimum in this example should be Interest plus 1% of balance, and it will then default to a $15 minimum.
2. In the minimum payment example, a 5% interest rate difference results in how much extra interest paid?
3. In the fixed rate example, how much would you save by doubling the fixed payment to $100 a month?
4. Assume you have a friend that 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?
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, half in July)
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.