Hit Me Up
Hit Me Up
Hit Me Up
$ Credit
Lesson Eight
Cards
04/09
name: _ date: _
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
Using the attached form, research the costs and features of:
■ Two major credit cards; and
■ One credit card from a department store.
1. Which credit card has the highest annual percentage rate and how much is it?
The Hudson Bay card has the highest. It is 29.99%.
2. What method is used to calculate the monthly finance charge for the first major credit card?
They multiply the average daily balance by the applicable monthly interest rate
3. When does the finance charge begin to accrue on the credit card from the
local department store?
Type of account:
PC Financial Mastercard Scotia Bank Scene Visa
Credit card
Charge card
Company name, Cloverdale Branch:
resident's Choice Bank
P
address, phone
25 York Street, P.O. Box 201, 7th ScotiaBank
floor 5699 176 street
604-576-3550
https://app.pcmastercard.pcfinancial. http://www.scotiabank.com/ca/en/0,,
Website ca/PCMCWeb/online_en.cmd 106,00.html
N/A N/A
Annual fee (if any)
21 days 21 days
Grace period
19.97%/22.97% 19.99%/22.99%
Annual Percentage
Rate (APR)
Finance charge They multiply the average daily They multiply the average daily
calculation method balance by the applicable monthly balance by the applicable monthly
interest rate interest rate
$500 minimum $500 minimum
Credit limit
A credit card statement provides information such as how and when you’ve used your credit
card, how much you owe, how much interest you’re paying to use the card, how much your
minimum payment is, and how much credit you have left.
Knowing how to read your credit card statement can also help you catch unauthorized
charges and/or billing errors.
So, it can pay to know how to read the statement!
directions
Use the credit card statement below to answer these questions:
1. What is the date of the statement?
2/13/09
2. What is the Annual Percentage Rate (APR)?
19.80%
3. What is the corresponding periodic rate?
1.65%
4. What is the new balance?
125.24
5. What was the previous balance?
168.80
6. How many charges were made during the billing cycle?
5
7. How many credits and payments were made during the billing cycle?
There were no credits, but there was one payment
8. Were there any charges for late payments? If so, how much were the charges?
No
9. What is the total amount of the credit line?
$1200.00
10. What is the total amount of available credit?
$1074..76
11. What is the total amount of charges made during the current billing period?
5
12. Was there a finance charge for the current billing cycle? If so, how much were the charges?
No
13. What is the account number on the statement?
4125-239-412
14. Where should the payment be sent?
Box 1234 Anytown, USA
15. What is the periodic rate for cash advances?
0.54%
what does your statement tell you? (continued)
directions
Use the Cost of Credit calculator at practicalmoneyskills.com to answer the following questions.
directions
José wants to buy a stereo for $650 and pay for it using a credit card
that has an Annual Percentage Rate of 19.85%.
If Patty pays the cash advance back at a rate of $130 per month:
10. How long will it take Patty to pay for the cash advance?
14 months
11. What is the total amount Patty will end up paying for the cash advance?
$1,734.50
Marie just used her new credit card to buy a bike for $400. Her budget allows her to pay no more
than $25 each month on her credit card. Marie has decided not to use the credit card again until
the bike is paid off. The credit card she used has an Annual Percentage Rate of 21%.
If Gary pays $25 each month, instead of the minimum monthly payment of $10 each month:
22. How much will Gary end up paying for his new watch?
$257.71
23. How long will it take Gary to pay for his watch?
11 months
24. What is the total amount of interest Gary will end up paying?
$22.71
name: _ date: _
directions
Read each of the following scenarios and determine if the purchase can be made and how
the decision will affect the credit load.
Write your answers in the blanks provided. Use the space below each problem to show how
you arrived at your answer. (Use the other side of this paper if you need more room.)
2. Jessie has a monthly net income of $800. His fixed monthly expenses consist of $150 for rent.
He currently pays $80 each month for a credit card bill, and now he wants to buy a car. What
does Jessie have left in his budget for a car payment to stay within his safe debt load?
Jesse has $570 in his budget, so he can only spend maximum $57 a month.
3. Carla has a monthly net income of $450. She wants to buy a new bike and pay for it using
a credit card. What is the largest monthly payment she can commit to making?
4. Jorge has a monthly net income of $640. His fixed monthly expense consists of a rent payment
of $120. (A) Right now, how much can he afford to borrow to stay within his safe debt load?
He also has a car payment of $125 per month. Jorge wants to buy new tires for his car. The
tires will cost him $40 each month on his credit card.
(B) With his car payment and the new tires, will he still be within his safe debt load?
165/640=26% No, because 26% is over the safe debt load
(C) What percentage of his net income, after rent, will he now have committed to
debt payments?
165/520=31%
name: _ date: _
true-false
1. T_ A proprietary credit card is usually accepted by one type of store or company.
2. T_ The average daily balance method of calculating interest is based on
the opening balance of the account for the previous month.
3. F_ The annual fee for a credit card is set by the government.
multiple choice
case application
Jack uses his credit card for almost all purchases. He charges gas purchases, clothing, food,
and other living expenses. What is your opinion of this money management habit?
I think that Jack should only use his credit card for big purchases unless he has a card with a good APR and no annual
fee because it is cheaper to use a debit card for things like clothing and food.
www.practicalmoneyskills.com credit cards quiz 8-5