Shopping with Interest - Warren Hills Regional School District
-238125-16192500 Shopping with InterestThis activity will illustrate how even smaller purchases cost more when you purchase on a credit card and do not pay the balance in full each month. For this activity, we will use the credit card calculator from : also make these assumptions:Your credit card’s interest rate (APR) is 19.9%.The minimum payment due each month is 3% of your starting balance.Suppose you have a credit card bill of $1,275 for the month of October. If you pay the full balance before your bill is due, how much will you pay in interest? If your credit card bill is $10,275 and you pay the full balance before the bill is due, how much will you pay in interest?The latest video game comes out and costs $60. You put it on your credit card and can’t afford to pay the whole bill all at once, so you make the minimum payment each month. How much is that minimum payment? Use the credit card calculator to determine how much total interest you’ll pay on this debt. When you include the purchase price and the interest, how much did the video game end up costing you?You desperately want a flat screen TV for your bedroom, and your parents won’t buy it for you. You put the $229 TV on your credit card and make the minimum monthly payment each month. Determine (a) the minimum monthly payment, (b) the interest you’ll pay, and (c) the full cost of the purchase.d. If, after 3 months of making the minimum payment, you receive an inflow of cash and can pay off the rest of your balance, what is the effect on the total interest payment (part b above?)Using your own knowledge or internet research on the initial cost of the items, complete the chart below to determine the total cost of your purchase, if you use a credit card and DON’T pay the bill in full each month but rather make only the minimum monthly payment.Description of the PurchasePurchase PriceMinimum Monthly PaymentInterestTotal Cost of the Itema new outfit to wear to a friend’s party$150the total cost of attending prom (attire, flowers, transportation, tickets…)$450Summarize the effect of credit card interest on the real cost of items.Explain how it is that many Americans find themselves swimming in credit card debt, unable to pay down their debt quickly.What are some strategies consumers can use to reduce the amount of interest they’ll pay on credit card debt? Esteban has a large credit card balance, such that his minimum monthly payment is $250. Every month he makes that payment and puts another $150 into his savings. His sister, Moira, says he should stop putting money into the savings account and start paying $400 per month toward the credit card debt. What do you think? ................
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