**Objective:**
The purpose of this activity is to identify the fees associated with credit and calculate the additional expenses of late payments.

**Directions:**
Read the disclosure statement carefully and answer the questions below. You will need a calculator to complete the activity.

**Furniture Store Credit Card Disclosure Statement:**

- On approved furniture store credit card purchases—based on your creditworthiness, other terms may apply.
- $2,399 minimum purchase required for this offer. Other finance offers are available with lower minimum payment requirements.
- The purchase amount is divided into equal monthly payments for the promotional period.
- An additional $37 will be added to the following month’s payment when payment is received after the due date.
- No finance charges for 24 months.
- 23.9% standard rate, APR.
- The promotion is canceled for accounts not current, and the default rate of 25.9% and regular minimum monthly payments apply.
- Minimum finance charge $2.
- Certain rules apply to the allocation of payments and finance charges on your promotional purchase if you make more than one purchase on your credit card. Call 1-800-123-4567 or review your cardholder agreement for information.
- Sale items and clearance items excluded.
- Offer does not apply to previous purchases and cannot be combined with other discounts.

**Questions:**

1. Kelsey and Cody want new living room furniture. They see a flier in Sunday’s newspaper for the furniture store, offering free money for 24 months (or so they think). At the store, they pick out a leather sofa and two ottomans. The sofa is $1,499 and each ottoman is $299. Are they eligible for the promotion?
- Yes
- No

2. Why or why not?

3. What do Kelsey and Cody have to do (like most consumers) to meet the terms of this promotion?

4. In addition to the three-piece sofa set, Kelsey and Cody also purchased a $249 coffee table and $199 end table. What is the total amount financed, including $153 for tax and $75 for delivery?

5. According to the conditions, what should their monthly payment be? If Kelsey and Cody do not send their payment in on time, what will the following month’s payment be?

6. Kelsey and Cody have been making payments on this furniture for 18 months, but Cody gets laid off from his job and their income drops substantially. They are unable to stay current on their account, even though they have paid $2,070 of the bill. According to the above terms, what happens to their bill?

7. Which finance charge will apply to them?
- 23.9%
- 25.9%
- 0%
- None of the above

8. Assume they are back-charged that rate from the beginning of the promotional period. How much will they owe in finance charges for the first year? ____________________________

9. What is the minimum amount they would have saved if they paid cash? (Hint: think about their original intended purchase.) _________________________________________