GreenT_M3_A2 - Analysis of Credit Card Debt MODULE 3...

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Analysis of Credit Card Debt MODULE 3 ASSIGNMENT 2: LASA 1 Terri Green | MAT 109 | November 15, 2016
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Credit card debt is a reality for many in today’s world. Suppose that you had a $5,270.00 balance on a credit card with an annual percentage rate (APR) of 15.53 percent. Consider the following questions and prepare a report based upon your conclusions. 1. Most credit cards require that you pay a minimum monthly payment of two percent of the balance. Based upon a balance of $5,270.00, what would be the minimum monthly payment (assuming no other fees are being applied)? Multiply the balance by the percentage due of the balance: $5,270.00 • 0.02% = $105.40 would be the minimum monthly payment. 2. Considering the minimum payment you just calculated, determine the amount of interest and the amount that was applied to reduce the principal. Hint: You’ll need to find the total interest for the year first. By using the I = Prt formula {I = Interest, P = Principle (balance), r = the annual percentage rate and t = time frame}, the calculations had shown: I = Prt (5,270) (.1553) (1/12) = $68.20. So, out of a monthly payment of $105.40 the amount of $68.20 would go towards interest and $37.20 would go towards the balance/principle. $105.40 - $68.20 = $37.20. According to PrivacyMatters, if only the minimum monthly payment was paid the total interest charges is $3,267.13 and the number of monthly payments would be 81 months (6.8 years). (PrivacyMatters, 2012) 3. Consider one of your credit cards. What is the balance? How is the minimum monthly payment determined? What would be the minimum payment? How much of the minimum payment goes towards interest? How much of the minimum payment goes towards the principal? I currently have a balance of $307.05 (balance is all purchases, no cash withdraws) on a Visa credit card that has a $2000.00 credit limit.
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  • Summer '15
  • JENNIFERCLAY
  • Psychology, Debt, Credit card, Bankrate, minimum monthly payment

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