Posted by Tara on .
You have credit card debt of $25,000 that has an APR (monthly compounding) of 15%. Each month you pay minimum monthly payment only. You are required to pay only the outstanding interest. You have received an offer in the mail for an otherwise identical credit card with an APR of 12%. After considering all hour alternatives, you decide to switch cards, roll over the outstanding balance on the old card into the new card, and borrow additional money as well. How much can you borrow today on the new card without change the minimum monthly payment you will be required to pay?
monthly interest charge on old card = 25000(1/12)(.15) = 312.50
now now you want
(25000 + x)(1/12)(.12) = 312.50
25000 + x = 31250
x = 6250
(Wow, what a dumb move, now you owe $31250 to a credit card company.
Some will raise your rate to about 19% if you are late with one payment )
Can you show me how to do this in excel?