Yvonne bought a new computer and printer for college. The total cost was $2500, which she put on her new credit card that has an interest rate of 13.5%. She makes a $75.00 monthly payment. How many months will it take to pay off the credit card balance?
I entered it into a calculator but its not really giving me anything back unless im missing a step. plz help thank you.
To find out how many months it will take to pay off the credit card balance, you will need to calculate the monthly interest charges and determine how many months it will take to pay off the balance with the given monthly payment of $75. Here's how you can do it step by step:
1. First, let's calculate the interest charged on the credit card balance each month. To do this, you need to multiply the balance by the monthly interest rate. The formula for calculating monthly interest is:
Monthly Interest = (Balance) * (Monthly Interest Rate)
In this case, the balance is $2500 and the monthly interest rate is 13.5%. So, the monthly interest can be calculated as:
Monthly Interest = $2500 * (13.5%/100) = $337.50
2. Now, subtract the monthly payment of $75 from the total amount paid towards the credit card balance (including interest) each month. The formula for calculating the amount applied towards the balance is:
Amount Applied Towards Balance = Monthly Payment - Monthly Interest
In this case, the amount applied towards the balance can be calculated as:
Amount Applied Towards Balance = $75 - $337.50 = -$262.50
Since the amount applied towards the balance is negative, it means that the monthly payment is not enough to cover the interest charges, resulting in an increasing balance every month.
3. To determine the number of months it will take to pay off the balance, divide the initial balance by the amount applied towards the balance each month and round up to the nearest whole number. The formula for calculating the number of months is:
Number of Months = (Initial Balance) / (Amount Applied Towards Balance)
In this case, the initial balance is $2500 and the amount applied towards the balance is -$262.50. So, the number of months can be calculated as:
Number of Months = $2500 / (-$262.50) ≈ 9.51
Since you can't have a fraction of a month, round up to the nearest whole number. Therefore, it will take approximately 10 months to pay off the credit card balance.
So, to pay off the $2500 credit card balance with a monthly payment of $75, it will take approximately 10 months. Remember, these calculations may vary slightly depending on the terms and conditions of the credit card, but this method should give you a rough estimate.