Question

Case Study: Lisa's Rewards Do the benefits of a credit card ever justif costs and risks? Background Lisa's dream has just come true. As a teenager growing up in Los Angeles, California, she has always dreamed of moving to New York City to pursue dancing and choreog- raphy in musical theater, and she just got notification that she was accepted to New York University's dance program with a generous scholarship. She is thrilled to be able to see this dream become a reality, although both she and her parents are a little saddened by the large distance that will be between them. The family can afford to visit Lisa once per year and to pay for Lisa to come back to L.A. for either the holiday break or the summer break, but not both. Lisa has always been a pretty good kid-she's responsible, maintained a solid A-aver- age through high school, and has even managed to save about $2,000 to help pay for living expenses during college by working a part-time job at GameSpot. She does have a weakness for video games, so most of her paycheck goes to support that addiction; luckily, the employee discount helps her stretch her game dollars farther. Lisa is planning to open a checking account with the money she has saved, and is thinking of getting a part-time job in New York to help pay living expenses to offset the need for loans. She will not do so, however, until at least midterms of the first semester have passed, so she knows how much time her academic coursework and additional dance practice will require. If she's doing well and has enough free time, she plans to

please state summary/thesis for this case study, strenghts& weakness & advantage and disadvantage of other cards.

Answer 1

Based on the findings, Lisa's parents financial background is not good where they can afford to pay only one visit or return journey.

Lets, consider the credit card offers from both the banks:

OrangeJet Airlines:

Benefits of the this company card.

1. Earns rewards on every payment towards airlines.

2. Multiples points by 5 times when purchased flight tickets.

3. Could earn a flight ticket or possibly two, which helps to increase the times of travel to visit her parents.

Disadvantages of this company card.

1. Charges Annual fee after one year @ $100.

2. APR @ 21.6%

3. Late fee @ $25

4. Default APR @ 33%

Local Bank:

Benefits of Local Bank:

1. No Annual Fees

2. No Late fee

3. No Default APR

4. Low APR than the OrangeJet Airways.

5. Alerting her parents when transaction exceeds $100.

Disadvantages:

1. Limit of spending of $500, which will be increased to $1000 next year upon timely payments.

2. APR of 11.2%

Based on Benefits and Limits of both the card offers, The local bank offer looks much better than the OrangeJet airways.

The reason being, although the OrangeJet airways provides you reward points for every transaction done, there is a high APR @ 21.6%, which will deduct approximately one-fifth of your earnings every year irrespective of your earnings. with an annual fee of $100, but can earn a free flight tickets. Moreover to earn those reward points you have spend more than you earn.

When it comes to Local Bank Credit Card, it has neither annual fees nor APR. It limits your transaction to only $500. and alerts her parents on excessive transactions.