actual cost of credit Essay

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Words: 299

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How much does it really cost???
Directions:
Use the Cost of Credit calculator at practicalmoneyskills.com to answer the following questions. (You are provided a link on D2L)
Questions:
José wants to buy a stereo for $650 and pay for it using a credit card that has an Annual Percentage
Rate of 19.85%.
If José pays the minimum monthly payment of $21.45:
1. How long will it take him to pay for the stereo?
43 months
2. What is the total amount José will pay for the stereo?
$909.54
3. What is José’s total cost of using credit?

$259.54
If José makes monthly payments of $60:
4. How many months will it take for José to pay off the stereo?
13 months
5. What is the total amount José will pay for the stereo?
$722.20
6. What is José’s total cost of using credit? $72.20

Questions:
Patty took a cash advance of $1,500. Her new credit card charges an Annual Percentage Rate of 21%. The transaction fee for cash advances is 3% of the cash advance, with a maximum fee of $35. This fee is added to the total cash advance, and accrues interest.
If Patty makes monthly payments of $65:
6. How long will it take Patty to pay for the cash advance?
31 months
7. What is the total amount Patty will end up paying for the cash advance?
$80
8. What is the total finance charge Patty will pay?

$462.70
If Patty pays the cash advance back at a rate of $130 per month:
9. How long will it take Patty to pay for the cash advance?
14 months
10. What is the total amount Patty will end up paying

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