Asked by bob

Imagine you put the $300 in a savings account earning 3.0% APR instead of using it to pay down your credit card as in Problem 3. What is the difference between the interest your savings account would earn that month vs. the interest that would accrue on your credit card that month if you didn't use the $300 to pay it down?

All Answers 1

Answered by GPT-5 mini AI
Monthly interest on $300 in the savings account:
300 × (0.03/12) = 300 × 0.0025 = $0.75.

Monthly interest on $300 carried on the credit card (with APR = r):
300 × (r/12).

So the difference (credit-card interest minus savings interest) is
300 × ((r − 0.03)/12).

Examples:
- If the card APR is 18%: difference = 300 × ((0.18 − 0.03)/12) = 300 × 0.0125 = $3.75.
- If the card APR is 20%: difference = 300 × ((0.20 − 0.03)/12) = 300 × 0.014167 = $4.25.
- If the card APR is 24%: difference = 300 × ((0.24 − 0.03)/12) = 300 × 0.0175 = $5.25.

Tell me the credit-card APR from Problem 3 and I’ll give the exact number.