In order to finance your education, you have had to borrow on your credit card. The Financial Consumer Agency of Canada provides you with the ability to determine how long it will take you to pay back your credit card. Go to www.fcac-acfc.gc.ca/iTools-iOutils/CreditCardPaymentCalculator/CreditCardCalculator-eng.aspx. Alternatively, go to www.fcac-acfc.gc.ca. Click on Tools and Calculators, then Credit Card Tools, then Credit Card Payment Calculator.

Instructions

(a) Assume that you have $2,000 outstanding on your credit card and you are making a minimum monthly payment of $60 (or a minimum monthly percentage of 3%). The interest rate on your credit card is 20%. How long will it take you to repay your loan? What if you make the minimum monthly payment and pay an additional $10? What if you make a fixed payment of $100 per month?

(b) Your university friend is about to obtain a credit card. His comment to you is, "The credit card company is giving me money to spend and I am going to purchase that big screen TV that I have always wanted." Based on what you have learned about credit cards, provide some advice to your friend.