Analysis of Credit Card Debt
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)? $105.40
$5270* .02= $105.40
2. Considering the minimum payment you just calculated, determine the amount of interest and the amount that was …show more content…
By paying the payment twice a month with at least a minimum of $50, you can cut your payment down to 34 months that is 2 years 10 months and your total interest $785.01. If you paid the minimum payment only you will pay $2925.11 over the 14 years. That is a difference of $2140.10. Think of all the things you can do with all the extra money! Not only did you cut the time you are paying on the debt but you saved 64% off the interest.
Paying the double payment the total paid would be $4010.01; $3225.00 principal plus $785.01 interest.
Information Source: Bankrate.com
Year 1 $ 1,825.39 $ 456.35 $ 1,369.04 $ 1,855.96
Year 2 $ 1,219.26 $ 255.68 $ 963.59 $ 1,855.96
10 months $ 965.36 $ 72.99 $ 892.37 $ -
6. Many Americans find themselves amassing large amounts of credit card (or other revolving) debt at an early age. What advice concerning the use of credit cards and the fees they charge would you provide to a young adult planning on getting a credit card?
My first piece of advice is to only charge what they know they can pay off when the bill comes due. Try not to carry a large balance. In other words...do not charge that 70” flat panel TV for $2500 just because someone gave you a credit card with a $3,000 balance. If you cannot afford to