MATH 1050

As a demonstration of the raw power of compound interest, we have here a breakdown of a specific burden of credit card debt with several strategies for paying that debt down. Compound interest is essentially an exponential formula, requiring use of logarithmic means to calculate required payments within specified timeframes.

Math, being an expression of reality, can be found everywhere. It is an extremely important tool for understanding the nature of interactions in the real world, not only financial interactions but also physical and even conceptual interactions. Jumping from an airplane is an increasingly popular hobby, and one in which math plays a larger role than a skydiver might expect. If I were to jump from a plane myself, I would certainly perform a thorough analysis of the acceleration expected and how it might compare to the strength of the parachute I hope to use. Credit card debt, though not quite as potentially lethal, can be a sort of financial equivalent to jumping from an airplane; with the payment plan one chooses standing in for the parachute.

In this assignment, we examined one of the most common pitfalls in America: credit card debt. Having an understanding of the mechanisms of credit card debt is highly beneficial, as compound interest is not a linear and instinctually understandable form of growth. By performing the operations of both payment and accrual of interest, we see that the cards are thoroughly stacked against the minimum payment method of “paying it down,” which in fact results in a far higher total loss than the initial amount.

I’m certainly not a financial advisor, but I could use this project to explain to anyone who asks that paying as much money as possible as quickly as possible to lower credit card debt is the most painless way to get out of that debt, despite its momentary sting. The best payment plan is to just pay the entire amount on the same day the debt is undertaken. If that’s not possible, I would suggest cutting any and all unnecessary expenditures and redirecting that money to pay off the debt in monthly or more frequent payments as funds are available.