Case Study: Credit Cards

Last June

$1$

$6$

$,$

$$Mr

$.$

$$Smith bought a vacation package for his family for $

$1$

$0$

$,$

$0$

$0$

$0$

$.$

$$He paid

for the package with his credit card. His card billing period runs from the

$1$

$6$

th of each

month to the

$1$

$5$

th of the following month. The package is the only purchase he made

with his card during the period June

$1$

$6$

$$

$$July

$1$

$5$

$.$

$$On July

$1$

$6$

$$an account statement

was issued by the credit card company requesting that he pay $

$1$

$0$

$,$

$0$

$0$

$0$

$$by August

$6$

$.$

Mr

$.$

$$Smith decided to pay $

$9$

$,$

$9$

$9$

$9$

$.$

$9$

$9$

$$on August

$6$

$,$

$$opting to repay the remaining $

$0$

$.$

$0$

$1$

with the next statement. He did not make any purchase during the billing cycle July

$1$

$6$

$$

$$August

$1$

$5$

$.$

$$On August

$1$

$6$

$$a new statement was issued. The statement showed a

balance of $

$3$

$3$

$6$

$.$

$8$

$8$

$.$

$$Mr

$.$

$$Smith immediately called his credit card company to declare

that a mistake had been made. The company checked his file and replied that there

was no mistake. Prove to Mr

$.$

$$Smith that the company

$$

s assertion is correct.

Reminder: For this study, you will need to use the

$$

Credit Cardholder Disclosure

Statement

$$

$$ ATTACHED IN THIS

THE LIMIT IS

$1$

$5$

$0$

$0$

$0$

$$AND THE APR IS

$1$

$9$

$.$

$9$

$9$

$\%$

$/$

YEAR

$1$

$0$

$$INTEREST

$$

$$

$$

Interest Rates. Interest is initially charged at the rate set out in the Summary of RatesCase Study: Credit Cards

Last June $16,$Mr$.$Smith bought a vacation package for his family for $$10,000.$He paid

for the package with his credit card. His card billing period runs from the $16$th of each

month to the $15$th of the following month. The package is the only purchase he made

with his card during the period June $16$July $15.$On July $16$an account statement

was issued by the credit card company requesting that he pay $$10,000$by August $6.$

Mr$.$Smith decided to pay $$9,999\mathrm{.}99$on August $6,$opting to repay the remaining $$0\mathrm{.}01$

with the next statement. He did not make any purchase during the billing cycle July

$16$August $15.$On August $16$a new statement was issued. The statement showed a

balance of $$336\mathrm{.}88.$Mr$.$Smith immediately called his credit card company to declare

that a mistake had been made. The company checked his file and replied that there

was no mistake. Prove to Mr$.$Smith that the company$$s assertion is correct.

Reminder: For this study, you will need to use the $$Credit Cardholder Disclosure

Statement$$ ATTACHED IN THIS

THE LIMIT IS $15000$AND THE APR IS $19\mathrm{.}99\%/$YEAR

$10$INTEREST

$$Interest Rates. Interest is initially charged at the rate set out in the Summary of Rates and Fees. Your current annual and daily interest rates are set out on your monthly statement. We may charge different interest rates on different portions of your Balance.

$$Interest on Cash Advances, Balance Transfers and Convenience Cheques. Interest is always charged on Cash Advances, Balance Transfers and Convenience Cheques. Interest is charged on Cash Advances beginning on the day they are taken. For Balance Transfers and Convenience Cheques, interest is charged beginning on the day those Transactions are posted to your Credit Card Account. We stop charging interest on Cash Advances, Balance Transters and Convenience Cheques on the day we receive a payment which covers the amount of the Transaction, as described in paragraph $9.$

Interest on Purchases. You will not be charged interest on Purchases appearing on a monthly statement if we receive payment for the full Balance shown on that monthly statement by the payment due date. If we do not, then interest charges on these Purchases will appear on your next monthly statement and interest will be charged retroactively on each Purchase from the Transaction date until we receive a payment which covers the Purchase, as described in paragraph $9.$Any interest which accrues on Purchases between the date of your last monthly statement and the date we receive the payment will appear on the next monthly statement.

$$Fees$.$Fees are treated like Purchases for the purposes of charging interest.

$$How Interest is Calculated. Interest is calculated by multiplying the total interest$-$bearing portions of your Balance at the end of each day by the daily interest rate applicable to each portion. The daily interest rate is the annual interest rate divided by the number of days in the year. Interest is calculated daily and added to your Balance monthly. We do not charge interest on interest.

$$Credit Balances. No interest is paid on credit balances. Credit balances are not deposits and are therefore not insured under the Canada Deposit Insurance Corporation Act.