Scenario A: Paying the minimum payment on a credit card versus paying extra to get the credit card paid off early.
Choose a credit card balance between $5,000 and $15,000 to do your calculations, using an 18% APR.
Access the “Credit Card and Compound Interest Worksheet" and first use Part 1) Determine the number of years of payments needed based on the credit card debt, interest rate, and payments size, then use Part 2) Determine a payment based on credit card debt, interest rate, and number of years until paid off.
Use Parts 1 and 2 to perform the following calculations:
Calculate how long it would take to pay off the credit card balance paying only the minimum payment.
Choose an amount of time between 2 and 10 years and calculate the monthly payment required to pay off the credit card balance in that amount of time.
Choose any amount over the minimum monthly payment and determine how long it would take to pay off the credit balance.
Address the following questions in your essay:
Do you think credit cards are a wise way to pay for things?
Do you think credit cards are necessary?
What would keep you from paying extra on the credit card?
What would it mean to you to be able to pay the credit card off early?
What would you be willing to give up or do to do be able to pay extra on the credit?
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