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Margie has had a tough month. First, she had dental work that cost $700. Next, she...

Margie has had a tough month. First, she had dental work that cost $700. Next, she had her car transmission rebuilt, which cost $1,400. She put both of these unexpected expenses on her credit card. If she does not pay her credit card balance when due, she will be charged 15% interest. Margie has $15000 in a money market account pays 5% interest. How much interest would she pay (annualized) if she does not pay off her credit card balance? How much interest will she lose if she writes the check out of her money market account? Should she write the check?

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Expert Solution

Answer :

Credit card balance = $700 + $1400 = $2100


Interest paid = $2100 x 15% = $315


Interest lost = $2100 x 5% = $105

Margie will pay the interest of $315 annually if she does not pay off her credit card.


If the interest owed on the credit card loan exceeds the interest earned on a​ deposit, margie will be better off paying off the credit card with funds from the money market account.


​Yes, Margie should write the check.

jeff jeffy answered 2 years ago
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