Gary Grandview – A Continuing Case – Part 2

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Name: Date: 3/12/13
Chapter 8
Building Your Own Financial Plan
Goals
1. Establish a credit limit that will enable you to pay credit card balances in full each month.
2. Select credit cards that will provide the most favorable terms at the lowest cost.
Analysis
1. Referring to your personal cash flow statement, determine how much excess cash inflows
you have each month. Based on this amount, set a self-imposed credit limit each month so
that you can pay off your balance in full. If you have existing credit card debt, use the
template below to determine how many months it will take you to pay off your balance
at three different monthly payment amounts. (The Excel template will perform the
calculations for you.) Revise your cash flow statement based on your decisions.
Alternative 1 Alternative 2 Alternative 3
Credit Card Debt
Monthly Payment
Interest Rate per Year
Months to Pay off Debt 0.00 0.00 0.00
2. Use the following template to select a credit card with favorable terms.
Rate the cards from “5” as the best in a category to “1” as the worst.
Bank Credit Card Scorecard
CREDIT CARD ISSUER
QUESTION 1 2 3 4 5
1. Annual fee
2. Interest rate on purchases
3. Interest rate on cash advances
4. Transaction fee for cash advances
5. Insurance on purchases
6. Credit earned toward purchases at selected businesses
7. Frequent flyer miles
8. Free delivery on mail order purchases
9. Phone card capability
10. Credit limit available
TOTAL 0 0 0 0 0
Decisions
1. What is your self-imposed credit limit each month for future credit card purchases? How much of your cash
inflows do you need to allot each month to paying off any existing credit card debt?
2. What credit cards offer the most favorable terms for your needs?

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