You owe $1,240.24 on a credit card with a 13.75% APR. You decide to pay $250.00/month toward paying off the credit card. How much is the difference in the interest paid after one month if you pay at the beginning of the month compared to paying at the end of the month?
$
The monthly interest rate can be found by dividing the APR by 12 months: 13.75% / 12 = 1.1458% per month.
If you pay at the beginning of the month, the average daily balance for the month will be $1,240.24 (the original balance) - $250 (payment) = $990.24.
The interest accrued for the month would then be $990.24 * 1.1458% = $11.34.
If you pay at the end of the month, the average daily balance for the month will be $1,240.24 (the original balance) = $1,240.24.
The interest accrued for the month would then be $1,240.24 * 1.1458% = $14.19.
Therefore, the difference in interest paid after one month is $14.19 - $11.34 = $2.85.
The difference in interest paid after one month is $2.85.