Michael recently asked his longtime girlfriend, Jenna, to marry him - and she sa
ID: 2767182 • Letter: M
Question
Michael recently asked his longtime girlfriend, Jenna, to marry him - and she said yes! Now Michael is starting to think about his financial future. He wants to have a long and enjoyable life, Michael currently has an auto loan and two credit cards. He owes about $4,000 on the car and has no problem making his required payments each month. Michael's VISA card has a credit limit of $1,500 and he only uses it for emergencies and does not carry a balance. His DISCOVER card has a credit limit of $1,000 and he keeps a balance of about $500 which he is paying off by making the minimum payment each month. He first opened his VISA card four years ago and only recently opened his DISCOVER card. Michael thinks it may be a good idea to pay off his auto loan so he only has credit card debt. Is this a good idea? Explain your answer, Upon graduation from college Michael has received four offers for other credit cards and thinks it may be a good idea to apply for all of them because he made need more credit in the future. Is this a good idea? Explain your answer.Explanation / Answer
Ans 1) It would not be a good idea to payoff the auto loan and carry on the Credit Card, the reason being the Auto Loan carries a lower rate of the interest than the Credit card. IF Michale has the liquidity he should first try to payoff the Credit Card dues followed by Auto Loan
Ans 2) There is no point of getting all the Credit Crad offers. Credit Card cannot be considered as a source of money flow. Rather he should focus on Job and make his financial life stable. Credit card should be used with utmost care, keeing in mind that you need to payback the sum.