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Credit Card Features, review & more

Credit Card Features, review & more. Annual Fee Grace Period Maximum Credit Limit Over-the-Limit Fees Finance Charge Minimum Payment Late Fees Incentives. (about 37 slides). Types of Credit Cards. “Single Purpose” Cards Allows you to buy things at one particular store.

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Credit Card Features, review & more

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  1. Credit Card Features, review & more Annual Fee Grace Period Maximum Credit Limit Over-the-Limit Fees Finance Charge Minimum Payment Late Fees Incentives (about 37 slides)

  2. Types of Credit Cards • “Single Purpose” Cards • Allows you to buy things at one particular store • Macys, Sears, Exxon, Target • Usually no annual fee

  3. Types of Credit Cards • “All-purpose” Cards • Usually no annual membership fee • Accepted by most retailers • VISA, MasterCard, Discover Card • Issued by banks • Each bank sets their own terms • Terms are not set by the financial services company

  4. Top credit card issuers Bank of America/MBNA Credit Issued: $194.70 billion ChaseCredit Issued: $184.09 billion CitiCredit Issued: $148.90 billion AmericanExpressCredit Issued: $105.00 billion CapitalOneCredit Issued: $68.78 billion DiscoverCredit Issued: $49.60 billion WellsFargoCredit Issued: $36.40 billion

  5. Number of Cards in circulation, 2013(in millions) http://www.creditcards.com/credit-card-news/credit-card-industry-facts-personal-debt-statistics-1276.php#Circulation

  6. Your Bank Restaurant’s Bank Account $1.75 $97.90 Your Card Account $0.17 $0.18 - $100.00 Restaurant’s Bank MasterCard $100.00 Restaurant Your Credit Card

  7. Paying off debt

  8. Isn’t it just 2 simple payments of $500? You charge $1000 on your credit card You are charged interest at 12% APR You want to pay off your debt in 2 months What is your monthly payment?

  9. So is it 2 simple payments of $505? You charge $1000 on your credit cardYou are charged interest at 12% APRYou want to pay off your debt in 2 monthsWhat is your monthly payment? Well then, isn’t it just $1000 + (1% of $1000) = $1010

  10. Is it 2 simple payments of $510? You charge $1000 on your credit cardYou are charged interest at 12% APRYou want to pay off your debt in 2 monthsWhat is your monthly payment? Well then, it’s 2 months so maybe it’s $1000 + (1% of $1000) + (1% of 1000) = $1020

  11. You charge $1000 on your credit cardYou are charged interest at 12% APRYou want to pay off your debt in 2 monthsWhat is your monthly payment? Well then, how do you do it!

  12. You charge $1000 on your credit cardYou are charged interest at 12% APRYou want to pay off your debt in 2 monthsWhat is your monthly payment? You don’t guess. You think. You begin to understand what’s really happening.

  13. $1000 borrowed Interest on what you owe You still owe Payment #1 Payment #2 Interest on what you still owe You charge $1000 on your credit cardYou are charged interest at 12% APRYou want to pay off your debt in 2 monthsWhat is your monthly payment?

  14. Amount charged $1000.00 Plus 1% interest on amount charged +10.00 But how did you get the monthly payment number?? Charge $1000 at 1%per month for 2 months… Amt owed at end of 1st month =$1010.00 minus Payment #1 - $507.51 Amt still owed = $502.49 Plus 1% interest on amount owed +$5.02 Amt owed at end of 2nd month =$507.51 minus Payment #2 - $507.51 Paid off = $0

  15. To find the monthly payment, you need three things: • Monthly interest rate • Number of payments • Amount owed

  16. Monthly Payment Formula • Can be done in a computer spreadsheet • Can be done on a Financial calculator • Can be done on a scientific calculator

  17. ) PMT( , , number of payments monthly interest rate -amount owed = Monthly Payment Formula Can be done in a computer spreadsheet =PMT(1%,2,-1000) 507.51

  18. Time-To-Pay-Off Formula How long will it take to pay off your credit card debt?

  19. How many payments to go? You owe $1200 on your credit card. Your card’s APR is 12%. You can afford to pay $40 each month. You promise yourself to make no more credit card purchases. How many more payments will you have to make?

  20. Time-To-Pay-Off Formula In Spreadsheet: =NPER(MonthlyRate,MonthlyPayment,-AmountOwed) =NPER(12%/12,40,-1200) =35.85 or 36 monthly payments

  21. Now You Try It!How many payments to go? You owe $8000 on your credit card. Your card’s APR is 18%. You can afford to pay $200 each month. You will make no more purchases. How many more payments to go?

  22. =NPER(MonthlyRate,MonthlyPayment,-AmountOwed) =NPER(18%/12,200,-8000) 61.54 or… 62 monthly payments

  23. Now You Try It!How many payments to go? You owe $2651 on your credit card. Your card’s APR is 15.33%. You can afford to pay $60 each month. You will make no more purchases. How many more payments to go?

  24. =NPER(MonthlyRate,MonthlyPayment,-AmountOwed) =NPER(15.33%/12,60,-2651) 65.47358887 or… 66 monthly payments

  25. Now You Try It!How many payments to go? You owe $890.12 on your credit card. Your card’s APR is 18.24%. You can afford to pay $50 each month. You will make no more purchases. How many more payments to go?

  26. =NPER(MonthlyRate,MonthlyPayment,-AmountOwed) =NPER(18.24%/12,50,-890.12) 20.91579998 or… 21 monthly payments

  27. How much should you pay? You owe $1200 on your credit card. Your card’s APR is 18%. You would like to pay off your debt in 3 years. You promise yourself not to make any more purchases. How much should you pay each month?

  28. =PMT(MonthlyRate,#ofMonthlyPayments,-AmountOwed) =PMT(18%/12,3*12,-1200) $43.38

  29. Now You Try It!How much should you pay? You owe $9050 on your credit card. Your card’s APR is 21.5%. You would like to pay off your debt in 5 years. You promise yourself not to make any more purchases. How much should you pay each month?

  30. =PMT(MonthlyRate,#ofMonthlyPayments,-AmountOwed) =PMT(21.5%/12,5*12,-9050) $247.39

  31. Now You Try It!How much should you pay? You owe $7955.35 on your credit card. Your card’s APR is 14.77%. You would like to pay off your debt in 18 months. You promise yourself not to make any more purchases. How much should you pay each month?

  32. =PMT(MonthlyRate,#ofMonthlyPayments,-AmountOwed) =PMT(14.77%/12,18,-7955.35) $495.43 But I can’t afford $495.43! I can only afford $150 a month. How many months will it take to pay the debt with $150 payments?

  33. =NPER(MonthlyRate,MonthlyPayment,-AmountOwed) =NPER(14.77%/12,150,-7955.35) 86.469 or… 87 monthly payments (7 years and 3 months)

  34. How many payments? =NPER(MonthlyRate,MonthlyPayment,-AmountOwed) Amount of each payment? =PMT(MonthlyRate,#ofMonthlyPayments,-AmountOwed)

  35. I would like to buy a car. The price of the car is $11,150.00 The dealer offers my a loan at 7.15% APR I’d like to pay off the car in 5 years. What’s my monthly payment? =PMT(MonthlyRate,#ofMonthlyPayments,-AmountOwed) =PMT(7.15%/12,5*12,-11150) $221.57

  36. I would like to buy a car. The price of the car is $11,150.00 The dealer offers my a loan at 7.15% APR I’d like to pay off the car in 3 years. What’s my monthly payment? =PMT(MonthlyRate,#ofMonthlyPayments,-AmountOwed) =PMT(7.15%/12,3*12,-11150) $345.04

  37. ---that’s enough for now---

  38. Time-To-Pay-Off Formula On calculator: Where M = monthly payment P = amount of loan r = monthly interest rate n = number of payment periods

  39. Time-To-Pay-Off Formula On calculator: • You owe $1200 on your credit card. P=1200 • Your card’s APR is 12%. r = 12%/12 • You can afford to pay $40 each month. M=40 • How many more payments to go?

  40. Time-To-Pay-Off Formula On calculator: • You owe $1200 on your credit card. P=1200 • Your card’s APR is 12%. r = 12%/12 • You can afford to pay $40 each month. M=40 • How many more payments to go?

  41. On PC calculator: (40/(40-(1200*0.01)))log/(1+0.01)log= 35.85 or… 36 monthly payments

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