Ch 4 les 1
Zach, a college freshman, uses his new credit card with a 19% APR for emergencies during a work break, facing minimum payments that may lead to costly interest and debt.
Mason Bennett
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20 days ago
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Minimum Payments Mean
Costly Consequences
CHAPTER 4, LESSON 1
DIBECnONS
Rc-jd the soemrio below. analyze- the data, and use the Minimum Fbymcni Schedule chan to answer the
following questions.
The Scenario
Zach, 3 collegefreshma n, recently signed upfor and received hisfi rstcredit ca rd. Thecredrt
card has a 19% annual percentage rate (APR}—that's the interest rate he'll have to pay to use
the money he bonows—a nd it has a minimum payment of only $10 or 2.5%ofthe balance
(whichever is larger}. Zach promised himself that he would use the credit card only for
emergencies. I n t h e m i d d l e o f Decern ber, Zach had to take off work for a couple weeks to
finish some end-of-semester projects, study for h is finals, and spend time at home over the
holiday break. Si nee he won t get a paycheck again until January, he used his credit card for
several item s he considered emergencies.
U C M I CREDIT CARD EMERGENCIES
Gas farthe drive back, home 5 5 5
Food (srucks far stu dying) 5 4 5
Christmas, gifts for family 5 2 2 5
Books for next semester sclasses 5 5 9 5
Total Dobt 5910
Many people in debt only make the minimum monthly payments on their credit cards.
So, what will happen if Zach just makes the minimum payments on this one credit card?
Assuming he charges nothing else and makes every minimum payment on time (two tig
assumptions), it will take him 154 months to pay for these 'emergencies."
Costly Consequences
CHAPTER 4, LESSON 1
DIBECnONS
Rc-jd the soemrio below. analyze- the data, and use the Minimum Fbymcni Schedule chan to answer the
following questions.
The Scenario
Zach, 3 collegefreshma n, recently signed upfor and received hisfi rstcredit ca rd. Thecredrt
card has a 19% annual percentage rate (APR}—that's the interest rate he'll have to pay to use
the money he bonows—a nd it has a minimum payment of only $10 or 2.5%ofthe balance
(whichever is larger}. Zach promised himself that he would use the credit card only for
emergencies. I n t h e m i d d l e o f Decern ber, Zach had to take off work for a couple weeks to
finish some end-of-semester projects, study for h is finals, and spend time at home over the
holiday break. Si nee he won t get a paycheck again until January, he used his credit card for
several item s he considered emergencies.
U C M I CREDIT CARD EMERGENCIES
Gas farthe drive back, home 5 5 5
Food (srucks far stu dying) 5 4 5
Christmas, gifts for family 5 2 2 5
Books for next semester sclasses 5 5 9 5
Total Dobt 5910
Many people in debt only make the minimum monthly payments on their credit cards.
So, what will happen if Zach just makes the minimum payments on this one credit card?
Assuming he charges nothing else and makes every minimum payment on time (two tig
assumptions), it will take him 154 months to pay for these 'emergencies."
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Subject
Finance