Question

Your Christmas ski vacation was great, but it unfortunately ran a bit over budget. All is not lost: You just received an offer in the mail to transfer your $12,000 balance from your current credit card, which charges an annual rate of 19.8 percent, to a new credit card charging a rate of 10.4 percent. How much faster could you pay the loan off by making your planned monthly payments of $225 with the new card? (Do not round intermediate calculations and round your final answer to 2 decimal places. (e.g., 32.16)) What if there was a 2 percent fee charged on any balances transferred? (Do not round intermediate calculations and round your final answer to 2 decimal places. (e.g., 32.16))

Answer 1

PART 1: It will be paid 57.67 months faster.

2: It will be paid off 55.66 months faster.

PART 1	Original Card	New Card
Amount due	12000	12000
Rate	19.80%	10.40%
Monthly payments	225	225
Time taken	129.56	71.88
Difference	57.67

PART 2	Original Card	New Card
Amount due	12000	12240
Rate	19.80%	10.40%
Monthly payments	225	225
Time taken	129.56	73.89
Difference	55.66

WORKINGS