Problem

This case is available in MyFinanceLab.Maria will be a college sophomore next year and she...

This case is available in MyFinanceLab.

Maria will be a college sophomore next year and she is determined to have her own credit card. She will not be employed during the school year but is convinced that she can pay for credit card expenses based on her summer earnings. Maria’s parents have read a number of articles about the problems of credit cards and college students, including examples of students leaving school after a downward spiral of credit cards, overspending, working to pay bills, worrying about bills, working more hours to pay bills, and eventually withdrawing from school. When Maria showed up with a handful of applications including Visa, a Gold MasterCard, Discover, a Visa sponsored by her university, an American Express, a secured MasterCard, and a gas company card her parents were overwhelmed. Maria admitted she didn’t want them all. “I’m not stupid,” she declared. Since Maria obviously needed to learn about credit cards, her parents agreed to cosign her application on one condition. She had to approach her choice just as she would a class project and research the following questions.

Should Maria have more than one card? What is the recommended number of credit cards for the average consumer?

Step-by-Step Solution

Solution 1

The recommended number of credit cards for the average consumer is three. One of those cards should only be set aside for emergencies. Having more than one credit card can allow one to avoid a higher interest rate and receive the maximum offered rewards on every purchase that he/she makes with a credit card.

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Solutions For Problems in Chapter 6DC.1