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Part 3: Credit Card Task (worth 5% of the final task)Part A: Shopping for a Credit CardCredit 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 CardYou 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 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 Advances1. What is a cash advance? 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 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 many months it would take to pay off your item if you just made the MINIMUM monthly payment.N (this is what you are finding)I% PV PMT (Make PMT negative)FV P/Y C/Y (Interest rate is compounded DAILY so C/Y is…….)PMT: ENDIt would take me _____________ months to pay off the credit card if I only made the minimum monthly payment.Part D: Alternatives to the Credit Card 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 time it would take to pay off each. Credit CardLine of CreditN (solve for this)I% PV PMT (Make PMT negative)FV P/Y C/Y (Daily)PMT: ENDN (solve for this)I% PV PMT (Make PMT negative)FV P/Y C/Y (Daily)PMT: ENDWhich is the better choice? Why?Part E: Conclusions about Credit Cards1. 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. 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. 3. What are some pros and cons to having a credit card?ProsCons ................
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