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Ch. 6.2 Credit Card Balances: How Long Do They Last?

Ch. 6.2 Credit Card Balances: How Long Do They Last?. Objectives Identify advantages and disadvantages of credit cards Determine how long it would take to pay off a credit card balance Determine the payment amount required to pay off a balance in a specific amount of time.

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Ch. 6.2 Credit Card Balances: How Long Do They Last?

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  1. Ch. 6.2 Credit Card Balances: How Long Do They Last? Objectives Identify advantages and disadvantages of credit cards Determine how long it would take to pay off a credit card balance Determine the payment amount required to pay off a balance in a specific amount of time

  2. Advantages of Credit Cards • They are convenient and simple to use. • You can delay payment for purchases. • There is a record of all the purchases. • You cannot lose money while purchasing. • Easy to order via internet or by phone. • Salespeople may come to know you, thus better service • You can make several purchases at once. • They help you take advantage of sales. • You can receive a cash advance.

  3. Disadvantages of Credit Cards • They encourage people to overspend. • One can lose track of what has been purchased. • Anyone can make a purchase via internet or phone with only your credit number. • Credit cards can be stolen. If your credit card is stolen you should notify your company immediately or you might be held liable for unauthorized purchases. • Identity theft.

  4. Identity Theft Many Americans are victims of credit card identity theft each year. What can you do to protect yourself? • Monitor you credit through a credit report company. • Keep track of your credit cards. • Immediately report any missing credit cards.

  5. Time-to –pay-off Balance Formula

  6. Sharpen Your Skills Example: Trevor’s Father just received a raise. As a result, he can afford a monthly payment of $300. How long will it take him to pay off his balance of 2,000, if the APR is 12%?

  7. Sharpen Your Skills Example: Mr. Torres can afford a monthly payment of $200. How long will it take Mr. Torres to pay off his credit card balance if he owes $2,100 at an APR of 22%? Work it out.

  8. Monthly Payment Formula for Paying off Balance

  9. Sharpen Your Skills Example: Say you are going to France to study abroad for a semester in 2 years. You would like to pay off you credit card balance by then which is $1,350. You have an APR of 7%. What will your monthly payment be?

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