Interest on Credit Cards. Eileen (from question 7) wants a car that costs $7,000. How long would it have taken Eileen to save for the outright purchase of the car if she did not have any credit card debt and used the interest payments to save for the purchase of the car? Eileen can invest funds in an account paying 4% interest.
Question 7
Credit Card Balance. Eileen is a college student who consistently uses her credit card as a source of funds. She has maxed out her credit card at the $6,000 limit. Eileen does not plan on increasing her credit card balance any further, but she has already been declined for a car loan on a badly needed vehicle due to her existing credit card debt. Her credit card charges her 20% annually on outstanding balances. If Eileen does not reduce her credit card debt, how much will she pay annually to her credit card company?
