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Name: _______________________Mark: /53Final Task Part 4: Credit CardsPart A: Shopping for a Credit Card (15 marks total)Credit card costs and features can vary greatly. This exercise will give you a chance to shop for and compare the costs and features of three credit cards.Directions: Research the costs and features of three credit cards.Go to this website: down to the ‘Credit Card Comparison Tool’Answer a few quick questions and then select “Show my credit cards”1. Credit Card Name: ___________________________Annual Fee: ___________________Interest Rates:For purchases _________________% For Cash Advance ______________%Other features (discounts at certain stores, incentives)2. Credit Card Name: ___________________________Annual Fee: ___________________Interest Rates:For purchases _________________% For Cash Advance ______________%Other features (discounts at certain stores, incentives)3. Credit Card Name: ___________________________Annual Fee: ___________________Interest Rates:For purchases _________________% For Cash Advance ______________%Other features (discounts at certain stores, incentives)Part B: Choose a Credit Card (8 marks)You have two options:Choose ONE of the above cards that you think fits your needs best and go that bank website (for example, if it is a Scotiabank Card, go to Scotiabank website). OR, if it would be more realistic, go to your OWN bank’s website and choose one of their credit cards that best fits your needs. Do a bit more research on your chosen credit card and answer the following questions:1. Which card did you choose? Why? (good rates, own bank, minimal fees…..)2. What is the minimum and/or maximum credit limit?3. What is the minimum monthly payment? (If it doesn’t say, assume $10 per month)4. Is there a grace period? If so, how many days?5. How can you apply for the card? (by phone, in person, online?)6. After learning more about the card, would you apply for it? Why or why not?Part C: Cash Advances (4 marks)1. What is a cash advance? (look up online if you aren’t sure )2. Why do you think cash advances tend to have higher interest rates? 3. When does interest on a cash advance normally start to accumulate, immediately or once you get your next bill?4. Why would it not be wise to use a credit card to take out a lot of cash advances?Part C: Making Smart Purchases (6 marks)Time to go shopping! Go online and find an item that you would like to purchase (could be anything appropriate!), maybe a laptop, iPad, furniture…..It can be anything you want but must cost more than $500.1. What does the item cost (including tax)? ________________2. Is this item something you need or just something you want?3. Would you normally save up to buy this item in cash or would you use a credit card?4. For this assignment, let’s assume you purchased the item on your credit card. After you purchased it, you had some unexpected and expensive emergencies occur and you were unable to pay off the balance of the card. Use the TVM solver to figure out how much your monthly payment would be if you plan to pay off your card in 2 years.N I% PV PMT (this is what you are finding)FV P/Y C/Y (Interest rate is compounded DAILY so C/Y is 365)PMT: ENDMy monthly payment would be $__________________.Part D: Alternatives to the Credit Card (10 marks) 1. What is a line of credit?2. Go on your bank website and research how you would apply for a line of credit. Are you eligible for a line of credit?3. It can be hard to find information on the interest rate charged for a line of credit. If you are able to find one on your bank site, what is it? If not, assume a rate between 9% and 12%.4. Let’s choose another item that you want to purchase, something practical yet more than $500. a) Cost of item (including tax) $__________________b) You purchase the item on your credit card, but then run into trouble. You have two choices, continue making the monthly payment on your credit card, or borrow money from your line of credit to pay off your credit card and then make payments on your line of credit. Which is the better option? Use the TVM Solver to compare the monthly payment for each if you plan to pay if off in 2 years.Credit CardLine of CreditN I% PV PMT (solve for this)FV P/Y C/Y (Daily)PMT: ENDN I% PV PMT (solve for this)FV P/Y C/Y (Daily)PMT: ENDWhich is the better choice? Why?Part E: Conclusions about Credit Cards (10 marks)1. Some people borrow money on a line of credit to pay off their credit card debt. Why would this be a smart thing to do? (2 marks)2. Credit cards can be very helpful and convenient, but only if you use them wisely. List some good habits you could develop to avoid paying interest on your credit card each month. (4 marks) 3. What are some pros and cons to having a credit card? (4 marks)ProsCons ................
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