Question

Assume that you have a $22,500 balance on your credit card. You plan to make monthly payments of $450 until the balance is paid off. The interest rate on your credit card is 17.5% p.a., compounded monthly. A letter in the mail informs you that you are approved for a new credit card and balance transfers are subject to a 9.5% p.a., compounded monthly. How many months sooner will you pay off your bill?

Answer 1

Around 26 months

Step-1:Calculation of number of months of payment in case of interest rate of 17.5%
Number of months	=	=nper(rate,pmt,-pv)			Where,
	=	90	Months		rate	17.5%/12	=	0.014583
					pmt		=	$        450
					pv		=	$ 22,500
Step-2:Calculation of number of months of payment in case of interest rate of 9.5%
Number of months	=	=nper(rate,pmt,-pv)			Where,
	=	64	Months		rate	9.5%/12	=	0.007917
					pmt		=	$        450
					pv		=	$ 22,500
Step-3:Calculation of how sooner balance paid off
Less month taken to paid off	=	90	-	64
	=	26	Months