Here, the minimum is the interest + 1% of the balance. For this reason, it has to default at $15 minimum.
Question 2: Impact of Interest Rates
For 5% increase, the interest = (5%+15%) = 20%/12 = 1.7% of the balance per month’s total payment which results to $2,100 for a period of 85 months.
For 5% decrease, the interest = (-5%+15%) = 10%/12 = 0.83% of the balance per month’s total payment which results to $2,058 for a period of 83 months.
Question 3: Impact of Payment Amount
Interest to be paid by making a fixed payment of $100 = $315
The required minimum payment that is equal to 1% + monthly interest = $789
The total interest to be paid = $798 - $315 = $474
Question 4: Credit Card Balance
Fixed payment at $100 = 24 months
Required minimum payment = 56 months
Therefore, the payment would be much quicker by 56 – 24 = 32 months.
Question 5: Minimum Monthly Payments
In this scenario, I think making only minimum payments will probably cost a person to make more extended payments. In effect, the cost will be more based on what I have already learned. Normally, the companies of credit cards add interest in one makes minimum payments. Such addition of interests is done when the customer fails to pay out the balance within thirty days. In this case, the interests are added by the company to enable them to get paid for letting the client use their cards. For this reason, I would urge my friend to try making payment for the balance in full. Alternatively, the minimum payment can be made, but it has to attract an extra $100 or $50 cost for not increasing the interest. Also, less time will be needed for paying the card off.
Question 6: Minimum Payments
By definition, the minimum payment refers to the lowest amount of money that a person is required to pay on the statement credit card each month. In the chart above, it is assumed the card will not be used while making the payment. Moreover, the balance reduces by only 1% each month in these minimum payments. However, some people will continue using the credit cards throughout the year. As a result, the balance will have to be carried past the grace period. In this case, the action to be taken while using the card while trying to pay off the balance is to allow the industry standard to calculate the minimum as all interest and fees due to that month plus the principal amount's 1% that the customer owns.
Question 7: Credit Card Usage and Repayment
There are various ways of proper management of credit card usage and repayment. Undoubtedly, the credit cards are one of the efficient ways of paying for the good and services that a person wants. However, such convenience sometimes comes at a cost. For this reason, there must be some ways of avoiding such costly fees and interest. In the first place, the cardholder has to keep track of the spending. Moreover, the credit card has to be closed properly. The repayments of the credit card should also be maximized. Credit should not be used for making ends meet. Additionally, one should consider using store cards wisely.
Question 8: Card Options
Regarding this information, card A is the best card to choose for personal use. In the above analysis, the card is evident to have a higher annual rate of interest than card B. For this reason, a higher rate of interest is earned by card A than card B annually. Moreover, the late payment fee for card A is lower than that of B. Also; it has no annual fees. Even though there are no reward programs that are incorporated in card A, the card still has a grace period that is lower than that of B. Everyone should go for card A.
