The balance on Taylor's credit card is $2000. It has an interest rate of 12.5%. She wants to compare the difference between paying $75 and $100 of the monthly balance. How much does she save in interest and fees if she pays $100 instead of $75?
Well, I'm not trying to clown around here, but let's crunch the numbers and see what we come up with.
If Taylor pays $75 of her monthly balance, the remaining balance that will accrue interest is $2000 - $75 = $1925.
If Taylor pays $100 of her monthly balance, the remaining balance that will accrue interest is $2000 - $100 = $1900.
With an interest rate of 12.5%, the interest that Taylor would pay for each month with a $1925 balance is 0.125 * $1925 = $240.62.
Similarly, the interest that Taylor would pay for each month with a $1900 balance is 0.125 * $1900 = $237.50.
To find out how much Taylor would save in interest by paying $100 instead of $75, we subtract the two interest amounts: $240.62 - $237.50 = $3.12.
So, by paying $100 instead of $75, Taylor would save approximately $3.12 in interest and fees. Not a huge amount, but hey, every cent counts, right?
To compare the difference in interest and fees that Taylor would save by paying $100 instead of $75, we need to calculate the interest and fees for each scenario.
Step 1: Calculate the interest and fees for paying $75.
The interest and fees can be calculated using the formula:
Interest and fees = Balance * Interest rate
Interest and fees for paying $75 = $2000 * 12.5% = $250
Step 2: Calculate the remaining balance after paying $75.
Remaining balance = Balance + Interest and fees - Payment
Remaining balance = $2000 + $250 - $75 = $2175
Step 3: Calculate the interest and fees for paying $100.
Interest and fees for paying $100 = Remaining balance * Interest rate
Interest and fees for paying $100 = $2175 * 12.5% = $271.88 (rounded to two decimal places)
Step 4: Calculate the difference in interest and fees between paying $100 and $75.
Difference in interest and fees = Interest and fees for paying $75 - Interest and fees for paying $100
Difference in interest and fees = $250 - $271.88 = -$21.88 (rounded to two decimal places)
Therefore, Taylor would save approximately $21.88 in interest and fees if she pays $100 instead of $75.
To answer this question, we need to calculate the interest and fees for both scenarios and compare the difference.
1. Calculate the interest and fees for paying $75 per month:
The interest rate is 12.5%, which means that the monthly interest rate is (12.5/100)/12 = 0.0104.
The interest accrued each month is: 0.0104 * $2000 = $20.80.
2. Calculate the interest and fees for paying $100 per month:
Using the same formula, the interest accrued each month is: 0.0104 * $2000 = $20.80.
3. Calculate the difference in interest and fees between the two payment amounts:
For both scenarios, the interest accrued per month is the same, which is $20.80.
So, there is no difference in the interest and fees between paying $75 and $100 per month.
Therefore, Taylor does not save any amount in interest and fees when she pays $100 instead of $75.
A credit card interest rate of 12.5% ?
Time for your school board to get new textbooks.
Anyway...
case 1: payment is $75
interest on 2000 = .125/12*2000 = $20.83
so the actual repayment on the balance = 75-20.83 = $54.17
balance = 1945.83
interest in the next month = $20.27
case 2: payment is $100
interest on 2000 is still $20.83
repayment = $79.73
balance = 1920.27
interest in the next month = 20.01
so she saved 82 cents in the interest the month after
Notice we had to take a look at the 2nd month to see any effect.
(pay off ALL of it!!!!)