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? |