Round any decimals to the nearest penny.

Question

Secured Unsecured
Credit APR APR
Excellent 4.75% 5.50%
Good 5.00% 5.90%
Average 5.85% 6.75%
Fair 6.40% 7.25%
Poor 7.50% 8.40%

Use the table above for interest rate questions.
You have a credit card that has a balance of $3,589.90 and a credit limit of $5,000. How much is the balance over the acceptable debt ratio percentage?
$
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Answer 1

To determine how much the balance is over the acceptable debt ratio percentage, we first need to calculate the acceptable debt ratio.

The acceptable debt ratio is typically calculated by considering the credit utilization, which is the ratio of credit card balance to credit limit. Most financial experts recommend keeping credit utilization below 30%.

1. Calculate 30% of the credit limit:

   • Credit limit = $5,000
   • Acceptable debt ratio = 30% of $5,000 = 0.30 × 5,000 = $1,500

2. Now, take the current balance and determine how much it exceeds this acceptable debt ratio:

   • Current balance = $3,589.90
   • Amount over the acceptable debt ratio = Current balance - Acceptable debt ratio
   • Amount over = $3,589.90 - $1,500 = $2,089.90

So, the balance over the acceptable debt ratio is $2,089.90.