Credit vs. Cash Answers

Robby is considering taking out a cash advance on his credit card to purchase a new television. His credit card offers cash advances up to $500.00 at an interest rate of 28% compounded monthly. If the television costs $350.00 and Robby plans to pay the balance of in 6 months, how much extra will he pay in interest to purchase the television?

Bob’s car needs a new transmission, a repair that will cost $1,763.00. Bob does not have enough money in his savings account to cover the cost of the repair. To make matters worse, Bob’s mechanic, who works out of his home, is unable to accept credit cards. Bob is hesitant to take out a cash advance on his credit card knowing that it will take him 12 months to pay of the balance and that a cash advance comes with a 30% interest rate. If Bob uses a cash advance to pay for the repairs, how much extra will he have to pay in interest?

Tim would like to use his income tax return to pay off one of his four credit cards. His previous plan was to pay off all four credit cards in the same timeline of 36 months. He wants to eliminate the card that is charging him the most interest on a monthly basis. The chart below outlines Tim's four credit cards, their balances, and their APRs. Which credit card should Tim use his tax return to pay off? Credit CardBalanceAPRA$1,260.0012%B$900.0018%C$1,290.009%D$1,200.0016%

Describe the effect an increase in n, the number of payment periods, has on the monthly payment P in the formula

The higher interest rate of a cash advance on a credit card with an existing balance can be eliminated by paying the cash advance back within four weeks.

As a New Year's resolution, Jimmy has agreed to pay off his 4 credit cards and completely eliminate his credit card debt within the next 12 months. Listed below are the balances and annual percentage rates for Jimmy's credit cards. In order to pay his credit card debt off in the next 12 months, what will Jimmy's total minimum credit card payment be? Credit CardCurrent BalanceAPRA$563.0016%B$2,525.0021%C$972.0019%D$389.0017%

Credit cards can only lead to debt that is difficult to eliminate and should be avoided at all costs.

Ralph is purchasing a new gaming system for $300.00. He is trying to decide whether he wants to use cash or his credit card to pay. He has $400.00 available in his checking account to pay for the system in full. Which of the following is not an argument that justifies Ralph’s use of his credit card to purchase the gaming system?

Sally needs to have some drywall and insulation work done in her house. She has received a quote from a professional drywall contractor to complete her repairs for $1,200. Her neighbor Steve says he can complete the same job for $800. Sally could use a credit card to pay the contractor, but Steve can only accept cash. Sally’s credit card has a 14% APR for credit purchases and a 32% interest rate for cash advances. Expecting to pay $50 of the principle plus appropriate interest each month, Sally estimates that it would take her 24 months to pay off the contractor balance and 16 months to pay off the cash advance balance. In the end, would it be cheaper for Sally to hire the contractor or her neighbor to complete the repairs?