I want a credit card--or do I?

Credit cards seem like a great way to pay for things. It only takes a small payment each month to buy whatever your heart desires. You can charge $1,000.00 for the paltry sum of $25.00 per month. But, will you still be paying when the thrill is gone?

The goal of this activity is to help make you aware of the cost of credit. 

1. Examine the different The Credit Card Advisor http://www.banx.com/creditcard.asp
   ABC Guides--Credit Cards   http://www.abcguides.com/creditcards/ccina.htm   and choose one.
2. Pretend to borrow $1,000.00 and assume a monthly payment of 2.5% of your balance.
3. Make a table with that contains the following information:
   • opening balance
   • interest charge for the month (remember to divide the APR by 12)
   • payment for the month
   • ending balance

   Do this for 12 months.

4. How much of your debt did you pay?
5. How much did you pay in total?
6. How much was interest and how much was principal?
7. Find the proportion of interest and principal to the total payments.
8. Make a pie chart with this information.

Now try this again, but this time use 5% of the original amount each month.

Now try it using 10% of the original amount each month.

Here are some other things you can try:

• Find the total time it would take to pay off the credit cards at the given rates of payment. Don't forget annual fees. You may find one of these bank card calculators useful.
  SmartCalc
  SmartCalc 2
  Credit Card Calculator
• Find out the total amount of interest you paid to borrow that $1,000.00.
• Does it take 4 times as long to pay off a card at 2.5% each month as it does at 10% each month?
• Talk to other students about what you discovered.
• Write up a brief report on your findings.
• Use a spreadsheet to do your computations and graphs.

Depending on the type of math class you are currently enrolled in, your teacher will have special formulas or procedures for you to use to find this information.