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21 January, 08:22

Sidney took a cash advance of $200 by using checks linked to her credit card account. the bank charges a cash advance fee of 2 percent on the amount borrowed and offers no grace period on cash advances. sidney paid the balance in full when the bill arrived.

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  1. 21 January, 09:01
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    Cash advance fee: 2% of $200 = 0.02 * 200.00 = $4.00 One month's interest, if the interest is compounded monthly: 18% of $204.00, divided by 12 months/year = 0.18 * 204.00 / 12 = $3.06 Total paid: $200 + $4 + $3.06 = $207.06 Paying directly with the card instead of borrowing cash would have saved the $4 charge and would also have reduced the interest from $3.06 to $3.00. Paying directly with the card and then paying before the billing cycle would also save the $3.00. She would only have paid the original $200, saving the whole $7.04. Effect of paying directly with the card and paying it off before the billing cycle: $200 total paid, saving $7.04 in fees and interest.
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