Every cardholder should know how much money will be added to the balance (over and above purchases) and in what circumstances. Together, these terms are known as finance charges or the cost of borrowing money.
Instructions Using the Practical Money Skills Cost of Credit Calculator, calculate the true cost of credit for each credit card scenario. It is given that payments are made on time so that no penalties or fees are incurred and the interest rate stays the same through the pay-off period. The calculator will open in a new tab/window.
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- Cardholder A has an excellent credit rating and has a $5000 balance on a credit card at 8% interest. Calculate the true cost of credit if Cardholder A pays $200.00 per month.
- $369.53, with 27 payments
$487.86, with 28 payments - $502.16, with 29 payments
- Cardholder B has a good credit rating and has a $5000 balance on a credit card at 12% interest. Calculate the true cost of credit if Cardholder B pays $200 per month.
$782.36, with 29 payments - $816.45, with 30 payments
- $632.72, with 31 payments
- Cardholder C has a fair credit rating and has a $5000 balance on a credit card at 16% interest. Calculate the true cost of credit if Cardholder C pays $200 per month:
- $5340.06, with 30 payments
$6,122.43, with 31 payment - $6,829.47, with 32 payments
- Cardholder D has a poor credit rating and has a $5000 balance on a credit card at 24% interest. Calculate the true cost of credit if Cardholder D pays $200 per month:
- $7,276.64, with 34 payments
- $8,115.42, with 35 payments
$7000.56, with 36 payments
Cost of Credit Calculator