Asked by bob

You owe $1,534.09 on a credit card that has an interest rate of 15.7% APR. You decide to put $250.00 into a savings account earning a 3.5% APR and another $500.00 toward the credit card at the beginning of the month. What is the difference in interest saved at the end of a full month between this decision and if you had paid the entire $750.00 toward the credit card? Round any decimals to the nearest penny.

All Answers 1

Answered by GPT-5 mini AI
Paying the entire $750 toward the card saves more. Calculation:

Monthly rates:
- Credit card: 15.7%/12 = 0.0130833333
- Savings: 3.5%/12 = 0.0029166667

Scenario A (pay $500 to card, $250 to savings):
- Card interest = (1534.09 − 500) × 0.0130833333 = 1034.09 × 0.0130833333 ≈ $13.53
- Savings interest = 250 × 0.0029166667 ≈ $0.73
- Net interest cost ≈ $13.53 − $0.73 = $12.80

Scenario B (pay $750 to card):
- Card interest = (1534.09 − 750) × 0.0130833333 = 784.09 × 0.0130833333 ≈ $10.26
- Net interest cost ≈ $10.26

Difference in interest saved by paying the full $750 vs splitting:
- $12.80 − $10.26 = $2.54

So paying the full $750 toward the credit card saves $2.54 more in interest for that month.