Question

Your parents have 3 credit cards. Each has its entire credit line used, and the credit limits are $1,800.00, $2,600.00, and $3,500.00. Paying off and closing which card would increase your parents' debt ratio the most?
(1 point)
Responses

$3,500.00 limit
$3,500.00 limit

$2,600.00 limit
$2,600.00 limit

$1,800.00 limit
$1,800.00 limit

The debt ratio remains the same.

Answer 1

The debt ratio remains the same.

Explanation: Total balance = total credit ($1,800 + $2,600 + $3,500 = $7,900), so utilization is 100%. Paying off and closing any one card reduces both the balance and the credit limit by the same amount, leaving utilization = (7,900 − L)/(7,900 − L) = 100%.