Janessa wants to pay off her credit card balances within 12 months. She is trying to decide if she should use her $1,000 in savings to pay off part of the balances or if she should transfer the balances to a new card with a low introductory rate. The new credit card has an introductory rate of 6.5% but charges a balance transfer fee of $50 for each balance transfer. Janessa decides to pay of Credit Card B and $420 of Credit Card A, then transfer the remaining balance of Credit Card A to the new card. Which of the following options shows the amount of Janessa's new monthly payment?Credit Card A: $957 Credit Card B: $580
After using $1,000 of savings, Janessa pays off Card B ($580) and puts $420 toward Card A. That leaves $957 − $420 = $537 to transfer. Adding the $50 transfer fee makes the new card balance $587. At 6.5% annual interest, amortized over 12 monthly payments, the payment is about $50.66 per month, so the correct choice is $50.66.
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