Mrs. Sekura
Monthly
Math Challenge #3
The Dangers of Credit Card Debt
Before you dive into this problem, please go to this site…
Watch the video. It will give you the necessary background information to better understand this problem.
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Let's practice using a minimum payment calculator:
The average family in Alberta carries a $3000 credit card debt.
If a family were to commit to NOT purchasing any more items on their credit card with a current balance of $3000,
a) How long would it take them, in years, to pay off their credit card if they pay only the minimum monthly payment?
b) How much have they paid in interest?
Here are a few details you will need…
The credit card balance is $3000.
The interest rate on the credit card is 16.9% per annum.
The minimum payment for this card is 3% of the amount owing or $10, whichever is greater.
Input the above information into the calculator found on this website:
Once the data has been input, push calculate, and then push View Report.
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According to the report, if the family continues to make the minimum payments, it will take them 13 years and 1 month to payoff this debt. The total interest paid will be $2,415.61.
YIKES!!!
NOW HERE'S YOUR PROBLEM: YOUR FIRST CREDIT CARD
You’re off to University. Within the first few weeks in residence you get a letter in the mail. You’ve been pre-approved for a credit card with a maximum balance of $5000 at 18.99%/a. SCORE!!!
You’ve been wanting to tech out your dorm room anyway.
You’ve activated your new credit card, so you’re off to Best Buy…
You decide to charge a large TV and gaming system to your credit card. (Who wants to watch TV in the common room anyway?)
You charge $1000 to your new credit card. Currently, you don’t have a job, so you can only pay the minimum monthly payment of 3% of the balance owing.
Using the site explored previously...
How long will it take you to pay off this purchase?
How much will the TV and gaming system cost you in total (principal + interest)?
Was it worth it? Explain.
