a person owes $200 on credit card a with an apr of 20%, and owes $400 on credit card b with an apr of 10%…

a person owes $200 on credit card a with an apr of 20%, and owes $400 on credit card b with an apr of 10%. after paying the minimum balance due, the person has $100 to use toward paying money owed. which of the following is recommended? pay $100 to credit card a. pay $100 to credit card b. pay $50 to credit card a and $50 to credit card b. put $100 in a savings account.

a person owes $200 on credit card a with an apr of 20%, and owes $400 on credit card b with an apr of 10%. after paying the minimum balance due, the person has $100 to use toward paying money owed. which of the following is recommended? pay $100 to credit card a. pay $100 to credit card b. pay $50 to credit card a and $50 to credit card b. put $100 in a savings account.

Answer

Explanation:

Step1: Calculate monthly interest rate for card A

APR of card A is 20%, so monthly rate $r_A=\frac{20%}{12}\approx 1.67%$. Monthly interest on card A is $I_A = 200\times1.67%=$3.34$.

Step2: Calculate monthly interest rate for card B

APR of card B is 10%, so monthly rate $r_B=\frac{10%}{12}\approx 0.83%$. Monthly interest on card B is $I_B = 400\times0.83%=$3.32$.

Step3: Analyze payment - options

Since the interest rate on card A is higher, paying off debt on card A first will save more in interest charges in the long - run.

Answer:

Pay $100 to credit card A.