Lets investigate what might happen if we were to not pay off the whole balance by the Payment Due Date.

1) According to CreditCards.coms credit card report, the current national average APR for credit cards is 17.67%. Lets assume Little Jimmy has a credit card with that APR and spent $850 in his first month having the card.

a) What does APR mean? What is the monthly rate for this credit card?

b) Suppose Jimmys minimum payment is $30.

Fill in the table below for the first 4 payments toward Jimmys balance. Assume Jimmy makes the minimum payment each month.

After __ Months

Interest Charged

N/A

Balance

$850

Payment

Remaining Balance

0 1

2 3

c)

Even though Jimmy is paying $30 each month on the balance, how much has his balance actually gone down after each payment? Why is his balance not going down by $30 each month?

Making even a minimum payment each month is very important. The minimum payment is not just an amount that the credit card companies want you to pay in order to get some of their money back, it is also a good thing for the card user to pay, at the very least, each month. Lets see if we can figure out why.

d) Suppose you have a credit card with a 25.56% APR that you use for a $700 purchase. You are currently only able to budget $10 a month toward the card.

Fill in the table below:

After __ Months

0 1 2 3

Interest Charged

Balance

Payment

Remaining Balance

N/A