Continuing Case: Tarek's Financial Journey Tarek has been thinking about getting a credit card, but he is skeptical that a credit card can be a useful spending tool for him. Instead, Tarek has always used a debit card. His reasoning is that using a debit card provides protection from overspending after all, he can only spend what is in his account. Instructions a. Provide Tarek with at least three reasons he should consider adding a credit card as a spending tool rather than relying solely on a debit card. b. Assuming that Tarek is now convinced that he needs a credit card, provide him with guidance on choosing between cards with different APRs. Specifically, when does choosing a credit card with a low APR really matter? c. Tarek has heard that it is quite difficult to get a credit card. He had a friend whose credit score was 550 and was denied a credit card. This got Tarek scared, so he obtained a free credit report, used a free online resource to get his FICO credit score, and found out his credit score is 745. Based on this information, how difficult will it be for Tarek to obtain a credit card? What other advice do you have for Tarek if he decided to obtain a credit card? d. Assume Tarek now has a credit card and he carries a $2,000 monthly balance. If the credit card company uses a 4% multiplier to determine the minimum monthly payment and the card has a 19% APR and 30-day billing cycle, what will be the minimum monthly payment? How much of the first payment will go toward paying interest? Continuing Case: Tarek's Financial Journey Tarek has been thinking about getting a credit card, but he is skeptical that a credit card can be a useful spending tool for him. Instead, Tarek has always used a debit card. His reasoning is that using a debit card provides protection from overspending after all, he can only spend what is in his account. Instructions a. Provide Tarek with at least three reasons he should consider adding a credit card as a spending tool rather than relying solely on a debit card. b. Assuming that Tarek is now convinced that he needs a credit card, provide him with guidance on choosing between cards with different APRs. Specifically, when does choosing a credit card with a low APR really matter? c. Tarek has heard that it is quite difficult to get a credit card. He had a friend whose credit score was 550 and was denied a credit card. This got Tarek scared, so he obtained a free credit report, used a free online resource to get his FICO credit score, and found out his credit score is 745. Based on this information, how difficult will it be for Tarek to obtain a credit card? What other advice do you have for Tarek if he decided to obtain a credit card? d. Assume Tarek now has a credit card and he carries a $2,000 monthly balance. If the credit card company uses a 4% multiplier to determine the minimum monthly payment and the card has a 19% APR and 30-day billing cycle, what will be the minimum monthly payment? How much of the first payment will go toward paying interest
