Introduction to Credit Cards Take 5 minutes: Write down 3 things you know, or think you know, about credit cards

Introduction to Credit Cards Based on our class discussion, do you think credit cards are: A dangerous financial instrument that can easily spiral you into debt A necessary evil to navigate today’s world An excellent financial tool that allows you freedom to purchase anything and even make things cheaper for yourself The Devil

Exponential Functions – Personal Finance Basic Formula for Compound Interest: A = P(1 + r/n)nt A = Final Amount P = Beginning Amount r = rate – expressed as a decimal n = number of compound periods in one year t = time in years

Credit Cards - Purchases Most credit card rates are in the range of 18-26% Credit card bills come monthly Only a minimum payment is required You can choose to pay: The minimum payment The full balance every month. Some amount in between. Interest Due to the Credit Card Company is calculated on the unpaid portion of the bill

Credit Cards - Purchases Credit Card First Example: You purchase a $1000 TV. Option 1 – Only paying the minimum balance Option 2- paying $100 per month Option 3 – paying the full amount when you get the bill

Credit Card Purchases – Day 2 You get a bill today for $3000 for your credit card this month. Figure out: How many months would it take to pay off this bill if you pay $200 each month (Assume your credit card is 21% interest). How much extra does this cost you?