Objective

The purpose of this activity is to identify the fees associated with credit and calculate the additional expenses of late payments.

Directions

Read the disclosure statement carefully and answer the questions below. You will need a calculator to complete the activity.

Furniture Store Credit Card Disclosure Statement: On approved furniture store credit card purchasesbased on your credit worthiness, other terms may apply. $2,399 minimum purchase required for this offer. Other finance offers available with lower minimum payment requirements. The purchase amount is divided into equal monthly payments for the promotional period. An additional $37 will be added to the following months payment when payment is received after the due date. No finance charges for 24 months. 23.9% standard rate, APR. The promotion is cancelled for accounts not current, and the default rate of 25.9% and regular minimum monthly payments apply. Minimum finance charge $2. Certain rules apply to the allocation of payments and finance charges on your promotional purchase if you make more than one purchase on your credit card. Call 1-800-123-4567 or review your cardholder agreement for information. Sale items and clearance items excluded. Offer does not apply to previous purchases and cannot be combined with other discounts.

8. Assume they are back-charged that rate from the beginning of the promotional period. How much will they owe in finance charges for the first year?

9. What is the minimum amount they would have saved if they paid cash? (Hint, think about their original intended purchase.)