Question

Read the information about two competing credit cards.

Credit Card 1 Credit Card 2
Interest rate 0% introductory rate, then 13.8% after one year 12.1%
Annual fee None No annual fee in the first year, then $30 each year thereafter
Credit Card 1 would be the better option if the borrower

had major expenses in the first year.
spent a lot of money in the second year.
used the card regularly in the long term.
carried a large balance in the long term.

Answer 1

had major expenses in the first year.

Reason: Card 1 offers a 0% introductory rate for the first year, so large purchases in year one incur no interest. After that its 13.8% rate (and Card 2’s lower 12.1% plus only a $30 annual fee) make Card 2 generally better for long-term or second-year balances.