Credit card A offers an introductory APR of 4.1% for the first 3 months and a standard APR of 18.5% thereafter, while credit card B offers an introductory APR of 3.7% for the first 3 months and a standard APR of 18.9% thereafter. All else being equal, which of these statements is correct? (Assume all interest is compounded monthly.)

Question

Mathematics

Karina Miranda

16 September, 08:51

Credit card A offers an introductory APR of 4.1% for the first 3 months and a standard APR of 18.5% thereafter, while credit card B offers an introductory APR of 3.7% for the first 3 months and a standard APR of 18.9% thereafter. All else being equal, which of these statements is correct? (Assume all interest is compounded monthly.)

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Answers (1)

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Jaylynn Mcmahon · Answer 1

Credit card A

First 3 months:

4.1% / 360 = 0.011% x 30 = 0.34% per month for the first 3 months.

Next 9 months:

18.5% / 360 = 0.051% x 30 = 1.54% per month for the next 9 months.

Credit card B:

First 3 months

3.7% / 360 = 0.010% x 30 = 0.30% per month for the first 3 months

Next 9 months:

18.9% / 360 = 0.0525% x 30 = 1.575% per month for the next 9 months

Credit Card B is the better deal for the first 3 months.

Credit Card A is the better deal for the next 9 months.