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banking activities

You may find it helpful to use a calculator for some of these activities.

Here is an activity to help you work out how much buying with a credit card could cost you:

For example you buy food from a supermarket costing £30. You pay for the food using your credit card. At the time of the purchase you have not actually paid out any money.

Two weeks later your credit card bill arrives. The bill says that you have to either pay back the FULL amount (£30) by a certain date or pay a minimum amount – it will say how much you must pay on your bill, somewhere around £5 in this case.

If you do not pay back the FULL amount you will have to pay back the full amount PLUS interest in future months. In the following example assume the amount of interest you have to pay back is 2% each month.

month	amount owed	interest	paid back	balance
1	£30	0	£5	£25

When your bill arrives for next month you will have to pay back the amount still owed (£25) PLUS interest at 2% per month:

month	amount owed	interest	paid back	balance
2	£25	£0.50	£5	£20.50

If you pay back just £5 every month how long will it take to pay off the bill? Use the chart on the following page to help you:

month	amount owed		interest		paid back		balance
1	£	30.00	£	0.00	£	5.00	£	25.00
2	£	25.00	£	0.50	£	5.00	£	20.50
3	£	20.50	£	0.41	£	5.00	£	15.91
4	£	15.91	£	0.32	£	5.00	£	11.23
5	£	11.23	£	0.23	£	5.00	£	6.46
6	£	6.46	£	0.13	£	5.00	£	1.59
7	£	1.59	£	0.03	£	1.62	£	0.00

Now work out how much interest you have been charged:

month	amount of interest
1	£	0.00
2	£	0.50
3	£	0.41
4	£	0.32
5	£	0.23
6	£	0.13
7	£	0.03

Remember, you bought food costing £30 and after seven months will have cost:

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