Credit Cards &

Store Promotions

Investment Returns= Low Int. Rates

Borrowing Charges= High Int. Rates

Example

Savings account = 1.5% return

Borrowing money or unpaid balances on credit cards could

= 19% - 28%

Calculating payment on unpaid balance on

Credit Card…

-Mike Spenslot has an unpaid balance on his credit card of

$4384.76-His card charges a rate of 19.50% per annum.

-The payment was due on March 23rd.

His minimum payment is $50 or

10% of the outstanding balance

Which ever is the GREATER

What is the minimum balance he will have to pay?

10% of $4384.76 = $43.85

$43.85 is less than $50, SO…

Minimum Payment = $50

What will his balance be on the 15th of April

First, calculate how many days it will be from March

23rd & April 15th

Include the 23rd & the 15th

31 Days in March31 – 23 = 9

15 days in April till the balance date

9 + 15 = 24 Days to calculate for

Next, convert rate to a decimal

19.50% = 0.1950

Now, as interest is calculated (usually) /annum…

We need to adjust the equation from 1yr to 24

days

So,We use I=Prt

I = ($4384.76) (0.1950) (24÷365) I = $56.22

To answer the question of “what would the balance be

on the 15th of April”…

We use A=P+I

A = $4384.76 + $56.22 =$4440.98

Let GIT R DUN

Store Promotions

These Promotions Usually have a HIGH Int.

Rate BUILT IN

Be sure you understand ALL the details BEFORE signing ANY agreement

EXAMPLEBloggins is buying a new flat screen TV from Future

shopThe offer is, $989.95 – No

$$ down and 4 “easy” payments of $265

What is the total cost of the TV on the payment plan?

4 x $265 = $1060

What is the different btwn the list price and what

Bloggins Paid?

$1060 – $989.95 = $70.05

= $70.05 of Interest over 4 months

What was the rate of interest?

Simple Interest formula

I = Prt

Except we switch it up

We need to find the Rate

r = t x I P

$70.05 = (989.95)(r)( 4 ) 12

I = Prt

$70.05 = (989.95)( 1 ) r 3

3 x $70.05 = 989.95 r

r = 3 x $70.05989.95

r = 0.212 Convert 0.212 to % =

21.2%

r = t x I P

21.2%

REALLY!