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Credit Card Disclosure Form

The document discusses terms found on credit card disclosure forms such as annual fee, credit limit, finance charge, and provides examples to calculate payoff amounts with minimum versus above-minimum monthly payments to highlight the savings from paying more than the minimum.

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Sarina Patel
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38 views3 pages

Credit Card Disclosure Form

The document discusses terms found on credit card disclosure forms such as annual fee, credit limit, finance charge, and provides examples to calculate payoff amounts with minimum versus above-minimum monthly payments to highlight the savings from paying more than the minimum.

Uploaded by

Sarina Patel
Copyright
© © All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
Available Formats
Download as DOCX, PDF, TXT or read online on Scribd
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The following terms are found on the credit card disclosure form.

Work with a partner to


locate the following information on the sample disclosure statement.

» Annual Fee: The fee a credit card company charges for the use of their credit card
» Credit Limit: The maximum amount of money the lender is willing to loan an applicant
» Finance Charge: The total cost of using credit including interest and fees
» Origination Fee: The charge for setting up a loan (often associated with home loans)
» Loan Term: The length of time you have to pay the loan. Remember, the longer the loan, the
lower your monthly payment, the greater the interest paid.
» Grace Period: The length of time that the lender charges no interest on money borrowed when
paying off your balance in full each month
» Annual Percentage Rate: The cost of the loan each year expressed as a percentage. All
lenders are required by law to calculate APR the same way.
» Introductory Rate: Lower interest rate offered by credit card companies, usually for a short
period of time, to entice you to sign up for credit with them. Eventually, the rate expires and a
new “increased” rate takes effect.

Questions Use the Sample Disclosure Form to answer questions 1–7.


1 Explain when this credit card company can adjust the APR.

2 What is the annual fee for having this credit card?

3 What is the grace period on this card?

4 What is the APR for this credit card?

5 How much will it cost, in fees, to transfer a $1,000 balance to this card?

6 What is the charge if you exceed your credit limit?

7 What will your charge be if your payment is late, and how will it affect your APR?
Go to foundationsU.com and locate the “Debt Snowball” under “Tools.” Enter the numbers for
the two following scenarios to compare the total cost of reducing a $1,000 credit card balance to
zero with minimum payments versus above-minimum payments. (Note: the following scenarios
do not use the Sample Disclosure Form.)

Scenario 1: Making Minimum Payments


» Total Debt (also called the principal amount): $1,000 » Interest Rate: 12.99% » Minimum
Payment: $30

8 Calculate the number of months it would take to pay off this debt.

9 Calculate the total amount (principal and interest) needed to pay off this debt if you only make
the minimum $30 per month payment. (# of months) × (monthly payment amount)

10. Calculate the total amount of interest that would be paid on this debt. (Total amount paid) –
(principal)

Scenario 2: Choosing to Pay More Than the Minimum Amount


» Total Debt: $1,000 » Interest Rate: 12.99% » Monthly Payment: $50

11.Calculate the number of months it would take to pay off this debt.

12.Calculate the total amount (principal and interest) needed to pay off this debt if you pay $50
per month. (# of months) × (monthly payment amount)

13.Calculate the total amount of interest that would be paid on this debt. (Total amount paid) –
(principal) Compare the total amount of interest paid in Scenario 1 to Scenario 2.

14.Calculate the amount of money you would save by paying more than the minimum amount.

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