European Stars and Stripes (Newspaper) - August 25, 1994, Darmstadt, Hesse                                Irskay August 25, 1994 the stars and stripes Page 19 a Why is cafes changing App a 9 for two reasons. First Money costs Money cafes must borrow to finance the huge growth in App which resulted from the expanded program begun last year. App debuted in Europe and the Pacific More than 15 years ago when most customer credit programs operated on the basis of a fixed rate. While most companies sought Large profits by charging their customers somewhere Between 18 and 21 percent cafes set its fixed rate at 12 percent and maintained that rate for 15 Drears providing overseas Exchange customers with truly excellent value. In recent times however constant cycles of tightening and loosening Money have made variable rate financing agreements commonplace in today credit business environment. Variable rates protect companies against fluctuating Market interest rates because customers pay the costs in a rising interest rate Market. The advantage to customers is that they also reap the benefits when interest rates decline. # second it is Worth remembering that the Mission of cafes is to generate funds for the services morale welfare and recreation mar programs As Well As provide Quality merchandise and services at uniformly Low prices. As military members Many of you will recognize that an implied task of our Mission is to Structure each cafes program in such a Way that it at least covers its own costs. In fiscal year 1993, cafes accomplished this Mission to the tune of $212.3 million paid to mar programs. Over the past 10 years payments have totalled $1.7 billion. The variable interest rate provides the Forward looking flexibility to ensure that App will continue to at least cover its costs while allowing for a continued flow of funds to mar programs. What Are my options if i have an existing account a 9 cafes will follow the common practice in the credit business of converting All Active accounts to the variable rate. Customers with existing accounts have two choices 1 you May Stop using your account by August 31 and continue to pay the current 12% rate on the balance. In , if you currently have a bal Ance on your App and Don t want the interest charge on that balance shifted to the variable rate then Don t make any purchases on your account alter August 31,1994. Once you be paid the balance you May close the account or resume making purchases at the variable rate. 2 you May continue using your account after August 31 and h Cion paying the variable rate on the entire balance. In other words if you currently have a balance on your App and agree to have the interest on that balance shifted to the variable rate then continue making purchases on your account after August 31, 1994. What if i Don t have an existing account but Antto open one � if you Don t currently have an account and open one after August 31, the variable interest rate terms will apply. Customer owes cafes fixed rate of 12% variable rate 12.5% Lamb iterate 13% variable rate 14% of inside retailer at 19% f ,. I i $1600 which he or she repays in 36 payments. Monthly payment$5#jbocv 54.00 54.00 55.00 59.00 total of payments $k884,4$r 1,899.86 v 1,915.04 1,938.31 2,063.30 interest pai4 $2%&& 299.86 31504 338.31 463.30 additional interest is. 12% a y a .-.,. 15.37 3055. 53.82 178.81 do i have better alternatives we believe App ii the How will the new variable rate affect Friy monthly payments a on August 16, the Federal Reserve raised Short term interest rates by one half percent increasing the prime rate from 7.25% to 7.75%. Since the App rate is determined by adding the prime rate to 4.75%, the App rate will now go to 12.5% prime rate of 7.75% 4.75%= 12,5%. How will this increase affect you lets say you re an average App customer repaying a balance of $1600 Over 36 months. The first thing you la notice from the table is that As the rate goes from 12% to 12.5%,your monthly payment remains at $54.00. That s because monthly App payments Are rounded up to the nearest Dollar and the additional Cost of your credit less than 43 � a month is not enough to increase your monthly Bill. So you la continue to pay $54.00 a month until your 36th payment at which time the payment will be Only $9.86. The additional interest paid at 12.5% Over 36 months is $1 5.37. While most economic predictions Are for the prime rate to go up Over time the Overall financial Impact on individual accounts should even then remain quite Small. Consider once again the typical customer who owes $1600 and pays off the debt in 36 payments at l 3%. As the table shows the monthly payment remains at $54.00 while the total additional interest Over the 36 month period increases by $30.55. That averages out to be about 85