Name __________________________ Date ...



Name __________________________ Date _________________________ Period _________

I WANT A CREDIT CARD — OR DO I?

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DUE DATE ________________________

Credit cards seem like a great way to pay for things. It only takes a small payment each month to buy whatever your heart desires. You can charge $ 1,000.00 and pay a minimum of $25.00 per month, BUT, will you still be paying when the thrill is gone?

Credit cards are an important part of personal finance for many. They are almost crucial in the consumer world. Credit cards can be used for purchases when cash is limited or when purchasing via catalog or mail. They are often required to secure reservations and provide for deposits. The frequent traveler and business owners are just a few consumers who rely on credit cards daily.

Soon you will be off into the real world beyond the walls of Whitesboro High School—working, going to college, or in the military--and you will be bombarded everyday with two to three credit card offers, if not more. Those of you going to college will probably see more—It'll be everywhere you go!!! You see it right now all over the place--on television, on the radio, in newspapers, in the mail, and even in those annoying pop-up ads on the Internet. In fact, recent statistics show that the average college undergraduate has $2748 in credit card debt. 95 % of those graduates who applied for graduate school student loans had at least one credit card and the average card balance was $4776. The question is: “Are you going to be financially responsible and mature enough to handle these tempting offers?”

There are a lot of reasons to use credit cards. As a consumer, you will see the importance and benefits of having a credit card, but you must also be careful not to fall into the credit card trap. This project will help you understand the negative effects of credit cards and help you decide whether or not a credit card is right for you. Another question is: “Do you know your financial rights with credit cards?” Finally, please ALWAYS, ALWAYS READ THE FINE PRINT!!! KNOW WHAT YOU’RE GETTING INTO BEFORE YOU SIGN THE DOTTED LINE!!!

With this in mind, you will now have an opportunity to discover some of the advantages and more importantly the pitfalls of credit cards.

For this project, you will research the various components of two credit cards and calculate the time it will take to pay off a given balance under different payment amounts.

PROCEDURE:

1. Examine the different BANK credit card offers at ABC GUIDES—Credit Cards

2. Look at each offer and CAREFULLY read and review each category (the Annual Percentage Rate (APR), the Introductory APR and how long is it for, the annual fee, if any, grace days, purchase/ travel benefits, etc.)

3. Select ONE of the BANK credit card offers. [For this project any variable APRs listed by the card will be assumed as fixed APRs].

4. Next, select ONE MERCHANT/ STORE credit card (ex. Macy’s, JcPenney’s, Wal-Mart, Abercrombie & Fitch, American Eagle, etc.

5. For EACH card, selected provide the following information: [Make a chart/table on Microsoft Word for this portion of the project]

• The issuing institution and type of card

• The APR for the card

• Minimum Monthly Payment Percentage

• Other APRs (balance transfer, cash advance, default APR)

• Is the rate fixed or variable?

• Grace Period

• Membership fee or Annual Fee, if any

• Minimum finance charge

• At least two miscellaneous fees

6. NOW GO SHOPPING!!! Create a LIST of dream items that you would purchase if you had $5,000.00 available to you (watch out for over-limit fees…don’t go over the $5,000.00 limit). Your final project will include a detailed list of these items along with their actual cost. Total the items and you will have your PRINCIPAL. YOU SHOULD HAVE TWO (2) DIFFERENT SHOPPING LISTS!!!

7. CALCULATE YOUR DEBT!!! Using your principal calculate the following using the requirements of EACH of your two credit cards. (Use a credit card amortization chart as a guide). Note: For this exercise, your APR will be fixed and no purchases will be added to the existing principle. Create a TABLE which contains the following information:

➢ Starting minimum monthly payment

➢ Your balance after 12 payments

[Assume the introductory APR period has ended—use the regular APR]

➢ Total interest paid in the first 12 months

➢ Total principal paid in the first 12 months [total paid-total interest paid]

➢ Make a pie chart for the last two questions

(Use Microsoft Excel or Word to create a pie chart)

➢ The number of years it will take to pay off the card and the total money paid (including interest).

8. Now calculate the above using 5 % of the principal as a minimum monthly payment. (REPEAT EVERYTHING IN #7 ABOVE).

**REMEMBER YOU ARE DOING THIS FOR BOTH THE BANK AND STORE

CREDIT CARDS.

9. Now calculate the above using 10 % of the principal as a minimum monthly payment. (REPEAT EVERYTHING IN #7 ABOVE).

**REMEMBER YOU ARE DOING THIS FOR BOTH THE BANK AND STORE

CREDIT CARDS.

***YOU ARE TO PROVIDE THE INFORMATION LISTED IN #7 ABOVE FOR

BOTH CARDS FOR THE:

- MINIMUM PAYMENT LISTED ON THE CARD

-5% MINIMUM PAYMENT, AND

-10% MINIMUM PAYMENT

10. TYPE a BRIEF report that includes the following:

• Explain the difference between a credit card and a debit card

• The benefits of a credit card

• The pitfalls of a credit card

• Which card of the two you researched you would choose and which percentage (minimum, 5%, or 10%) you would use to pay it back (remember to consider your budget) and why you would pay that amount

• The optimal use of a credit card

• Your conclusions regarding credit cards in general

• How you will apply what you learned about credit cards in your life specifically

**You are expected to elaborate on your responses. One sentence per question will not be considered a quality response or warrant a high grade.

Be sure to include all required components, as listed on the following page, in your final product. You may lay out the project in any format that you like but remember that content, presentation clarity, and organization will count towards your final grade.

YOU WILL NEED TO HAND IN THE FOLLOWING ITEMS:

1. A PRINT OUT of the two credit card offers you selected (ONE bank card and ONE store/merchant card)—it should include the APR, Introductory APR, Annual Fee, Grace Days, etc.

2. A complete and detailed list of all “purchases” made with the $5,000.00, including the actual name and cost of product (ex. New Balance sneakers $120.00) Remember, you need two (2) different shopping lists.

READ THE FOLLOWING CAREFULLY:

3. A COMPLETE and ACCURATE response to PROCEDURE STEP # 7 above for monthly payments at the minimum listed with the card, 5 %, and 10 % (You need to have 6 responses—one for EACH card at EACH payment percentage). This will include:

• Pie charts that correspond to the questions in PROCEDURE STEP # 7 for the monthly payments at minimum as listed with the card, 5%, and 10%. You should have 6 different pie charts (one for each card at each percent). [The answers for Procedure #7 and the pie charts may be done together on the same page, if you choose].

• A print out of how long it would take to pay the debt at EACH percentage for EACH card at the given APR rate (a total of 6 printouts).

4. A TYPED and THOROUGH report with your response to the questions described in PROCEDURE # 10.

YOUR GRADE WILL BE BASED ON THE FOLLOWING CRITERIA:

➢ Project turned in on time.

➢ All printouts turned in.

➢ All questions properly and thoroughly answered and typed on Microsoft Word.

➢ Calculations are accurate and complete

➢ All pie charts are properly completed and turned in.

➢ Response to questions is thorough and detailed.

➢ Project demonstrates organization and thought

Name ____________________________ Date _______________________ Period ________

I WANT A CREDIT CARD—OR DO I?

GRADING RUBRIC

YOUR GRADE WILL BE BASED ON THE FOLLOWING CRITERIA:

➢ Project turned in on time _____ / 10

➢ Project demonstrates thought

and organization _____ / 5

➢ Printouts of the information

for both credit cards _____ / 10

➢ A complete & detailed list of

purchases (Two different lists) _____ / 10

➢ All questions properly and

thoroughly answered and

typed on Microsoft Word for

Procedure #7 (includes 6 responses) _____ / 15

➢ Calculations are precise and

accurate _____ / 5

➢ Pie charts for Procedure #7

(includes 6 graphs) _____ / 15

➢ Printouts of the information

for time to pay off debt

(includes 6 printouts) _____ / 10

➢ Typed response to questions in

Procedure #10 that are

thoroughly answered _____ / 20

TOTAL _____ / 100

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***SUGGESTION: USE THE COMPOUND INTEREST CALCULATOR ON MY WEBPAGE

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YOU BEST WAIT BEFORE YOU USE A CREDIT CARD AND GO INTO DEBT!

CONGRATULATIONS! YOU UNDERSTAND THE RISK OF A CREDIT CARD

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