Unit 3 Project PDF

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Paige Ziebell R11502977 Introduction to Personal Finance Unit 3 Project Learning Goals:  Understand the concept of borrowing and how it relates to consumer credit.  Understand how to compare and contrast consumer loan options. 1. Imagine a person who is a revolving credit card user, which means they don’t pay off the balance in full each month. Recommend one credit card for someone with excellent credit, one credit card for someone with poor credit, and one credit card specifically for students. Explain selecting that particular card, include concepts from the reading/video materials. To find credit cards go to http://www.creditcards.com/. Excellent Credit: APR: 14.74% - 24.74% Grace Period: 23 days Annual Fee: $0 Other Fees: Minimum Interest Charge: $0.50 Fee for Foreign Purchases: 3% of the U.S. dollar amount of each purchase Balance Transfer Fee: $5 or 3% of the amount of each transfer, whichever is greater Cash Advance Fee: $10 or 5% of the amount of each cash advance, whichever is greater Bad or Poor Credit: APR:17.99% - 23.99% Grace Period: 21 days Annual Fee: $0 - $99 Other Fees: Foreign Transaction Fee: 3% Return Payment Fee: up to $39 Late Payment Fee: up to $39 Student Credit Card: APR:12.99% - 21.99% Grace Period: 25 days or 23 days for billing periods starting on February 2 Annual Fee: $0 Other Fees: Cash Advantage Fee: $10 – 5% Balance Transfer Fee: 3%

An explanation for card selection Citi Diamond Preferred Card has a 0% intro APR for up to 18 months from the purchase date while the balance can also be completed up to 4 months of opening an account. This card would perfect for an individual who has excellent credit.

An explanation for card selection For someone with bad or poor credit they should opt for the Credit One Bank Visa Credit Card because you can earn 1% cash back and also has a 0-fraud liability.

An explanation for card selection For students beginning to build their credit score the Discover it- Student Cash Back would be perfect because you can earn 5% cash back on groceries, amazon shopping, and restaurants.

Intro Fee: 5%

2. What type of credit would be appropriate if the individual paid their balance in full every month? What would be most important to this person when choosing a credit card? Citi Diamond Preferred Card because by paying their balance in full each month you can maintain your existing credit while also building on to it.

3. If you were looking to get a new credit card, which features would be most important for you to pay attention to? What would you want to make sure to avoid? I would look for something that has a low interest rate while also avoiding any fees so I can begin to build my credit over time.

4. Real-world examples, please show your work! a. Suppose Daryl spontaneously decides to treat all his friends to pizza, drinks, and dessert at a dine-in Italian place. He has already spent his excess cash from his paycheck, so he decides to put it on his credit card and pay for it later. The total cost for the pizza for his group of friends, including the tip, is $149.45. His credit card has an interest rate of 21.99%. If he makes payments of $25 per month, how long it takes him to pay for that spontaneous purchase? N I/Y PV PMT FV

6.5 months 21.00/12 = 1.832 $149.45 -$25 0

b. Say Daryl treats his friends a few times during the month and accumulates a debt of $674.87 on his credit card. His credit card and has an interest rate of 21.99%. If he makes payments of $25 per month, how long it takes him to pay for this generosity which his friends appreciate but he can’t currently afford? N I/Y

37.5879 21.99/12 = 1.8325

PV PMT FV

$674.87 -$25 0

c. What does this tell you about credit card usage? What is the risk of using a credit card? When is it a good thing? How can you use a credit card responsibly? I think a credit card can be beneficial if you stay on top of your balance and payments otherwise you can hurt your credit score financially if you are overspending without any consideration of the risks at stake which is what appears to be the mistakes Daryl is making....