Question
If you buy a $1,000 bicycle, which credit card payoff strategy will result in your paying the LEAST total amount?---Si compra una bicicleta de $ 1,000, ¿qué estrategia de pago con tarjeta de crédito resultará en que pague el menor monto total?
A.
Pay the minimum monthly payment---Pagar el pago mensual mínimo
B.
Pay $100 per month for 10 months
C.
Pay $250 per month until it's paid off (por mes hasta que se pague)
D.
Don't make any payments until you have the full $1000 saved, regardless of how long that takes---No realice ningún pago hasta que tenga los $ 1000 completos ahorrados, independientemente de cuánto tiempo lleve
A.
Pay the minimum monthly payment---Pagar el pago mensual mínimo
B.
Pay $100 per month for 10 months
C.
Pay $250 per month until it's paid off (por mes hasta que se pague)
D.
Don't make any payments until you have the full $1000 saved, regardless of how long that takes---No realice ningún pago hasta que tenga los $ 1000 completos ahorrados, independientemente de cuánto tiempo lleve
Answers
GPT-4o mini
To determine which credit card payoff strategy will result in the least total amount paid for the $1,000 bicycle, we need to consider how interest typically accumulates on credit card balances and how each payment strategy affects the total cost.
### Strategies:
A. **Pay the minimum monthly payment**:
- This strategy usually results in paying a lot of interest over time because minimum payments are often a small percentage of the total balance. This can lead to a long pay-off period and significant interest payments.
B. **Pay $100 per month for 10 months**:
- This would involve paying off the bicycle relatively quickly, but you would still incur interest during those 10 months if your card has a balance, which could increase the total amount paid.
C. **Pay $250 per month until it's paid off**:
- This will allow you to pay off the bike quickly (in 4 months or less), reducing the time your balance accrues interest, thus potentially lowering the total amount paid.
D. **Don't make any payments until you have the full $1,000 saved**:
- This option means you would not incur any interest until you have saved the $1,000, assuming you are able to do so without any additional fees. However, you'd be postponing the purchase until you have saved the full amount.
### Conclusion:
The strategy that will typically result in the **least total amount paid** would be:
**C. Pay $250 per month until it's paid off**.
Paying off the balance quickly minimizes the time interest accrues, making it a more cost-effective strategy compared to paying the minimum or lower amounts over a longer period. The first option (paying the minimum) is the least favorable due to the high amount of interest that would accumulate.
### Strategies:
A. **Pay the minimum monthly payment**:
- This strategy usually results in paying a lot of interest over time because minimum payments are often a small percentage of the total balance. This can lead to a long pay-off period and significant interest payments.
B. **Pay $100 per month for 10 months**:
- This would involve paying off the bicycle relatively quickly, but you would still incur interest during those 10 months if your card has a balance, which could increase the total amount paid.
C. **Pay $250 per month until it's paid off**:
- This will allow you to pay off the bike quickly (in 4 months or less), reducing the time your balance accrues interest, thus potentially lowering the total amount paid.
D. **Don't make any payments until you have the full $1,000 saved**:
- This option means you would not incur any interest until you have saved the $1,000, assuming you are able to do so without any additional fees. However, you'd be postponing the purchase until you have saved the full amount.
### Conclusion:
The strategy that will typically result in the **least total amount paid** would be:
**C. Pay $250 per month until it's paid off**.
Paying off the balance quickly minimizes the time interest accrues, making it a more cost-effective strategy compared to paying the minimum or lower amounts over a longer period. The first option (paying the minimum) is the least favorable due to the high amount of interest that would accumulate.