The Cost of Credit

Question 18 • 2027 Ignite Financial Literacy-Personal Finance - EL3403

It will take Cody 3 months to save up enough money to purchase a stereo. He has a credit card with a 12% interest rate. Cody’s friend Mark says it will cost Cody less money if he saves for 3 months instead of using the credit card. Is Mark correct?

Answer

Correct Answer:

Mark is correct. If Cody uses the credit card, he will have to pay interest during each month in which he does not pay off the balance of the card. If he saves money, he will not have to pay interest.

More from this Course

How Credit Works

The Cost of Credit

Instruction