To calculate the amount of interest saved by paying at the beginning of the month on a credit card balance, we need to compare two scenarios:
Scenario 1: Making the minimum payment of $50 at the end of the month
Scenario 2: Paying the full balance of $848.42 at the beginning of the month
Scenario 1:
For the first scenario, interest will be calculated on the remaining balance of $848.42 after the $50 minimum payment is made. The monthly interest rate is 12.75% / 12 = 1.0625%.
Interest for the first month = $848.42 * 1.0625% = $9.00
New balance after payment and interest = $848.42 - $50 + $9 = $807.42
Scenario 2:
For the second scenario, the full balance is paid at the beginning of the month, so no interest will be accrued.
Interest saved = Interest in Scenario 1 - Interest in Scenario 2
Interest saved = $9.00 - $0.00 = $9.00
Therefore, by paying the full balance at the beginning of the month instead of just the minimum payment, you would save $9.00 in interest.
you owe $848.42 on a credit card at a 12.75% apr the minimum payment of $50
how much do you save in interest by paying at the beginning of the month
1 answer