Although 55 million Americans pay off their credit card balances in full each month, 90 million Americans carry an average of $8000 in debt from month to month. Credit card companies print a required minimum payment on the bill, usually 2-2.5 percent of the outstanding balance. Most Americans do not know what interest rate they are actually paying. Nor are they aware that their interest rate can change in the course of their payment. With this assignment we are going to look at the length of time it takes to pay off a credit card using various interest rates and monthly payments.

Directions:

Using the information you find at: https://www.phoenixunion.org/Page/7918 figure out how much repaying an $8000 credit card debt/ credit card balance will cost at interest rates of 12 percent, 19 percent and 28 percent with:

a) Only the required minimum monthly payment

b) A fixed payment of $250

c) A fixed payment of $500

Note: Assume that your minimum payment is calculated at 2 percent. Be sure to choose EITHER "minimum payment" OR "fixed payment" before you click on “calculate.”

$8,000 x .02 = __$___________

Credit Card Repayment Chart

You are an American family determined to pay off your $8000 credit card debt. How long will it take? How much interest will you pay? Remember this chart is for debt you already have – it does not include any new debt you might incur during the period of repayment. Be prepared to discuss your findings. (1 point each)

Questions:

1. Which credit card payoff is the best deal (which percent and which payment)? Why? (2 points)

2. Why did you get the answer for number of months and total interest paid that you did when making the minimum payment at an interest rate of 28%? (1 point)

Annual Credit Report Questions 

By law, every American is entitled to a free credit report. This helps protect Americans from identity theft or errors on their credit reports that might cause them to be turned down for a loan. With this assignment you are going to visit the ONLY website where you can receive a free credit report. Other websites that claim to offer this are scams or are offered by the credit reporting companies themselves in an attempt to sell you other products.

Go to this website: http://www.annualcreditreport.com/

Answer the following questions (Use the site’s home page and the links for “All About Credit Reports” and “Protect Your Identity” on the site to find most of the answers):

(1 point each)

1.      How often can you request a free credit report?

2.      What are three ways to request a free credit report?

3.      What are the three credit reporting companies (these are also called credit bureaus or credit reporting agencies)?

4.      Can you get a report from each of the 3 credit reporting companies?

5.      What is a “fraud alert” and how do you get one created?