Question

Michelle has four credit cards with the balances and interest rates listed below. Rather than budget to pay each of the credit cards off in 36 months, Michelle would like to pay them off one at a time based on the balance for each credit card. In which order should Michelle pay off her credit cards?
Credit Card Balance APR
#1 $4,380 17%
#2 $1,365 19%
#3 $2,480 23%
#4 $5,000 15%

Answer 1

Answer:

#4, #1, #3, #2

Step-by-step explanation:

We will calculate the total amount for each of the credit card and then arrange them in descending order according to their interest after 36 months (3 years)

Interest on Credit card 1 = $\frac{4380*17*3}{100}$

                                        = $2233

Interest on credit card 2 = $\frac{1365*19*3}{100}$

                                        = $778

Interest on credit card 3 = $\frac{2480*23*3}{100}$

                                        = $1656

Interest on credit card 4 = $\frac{5000*15*3}{100}$

                                        = 2250

Hence the correct order to pay off all the credit card balances is

#4, #1, #3, #2