Question

Jamie lee received an offer to transfer the balance of all of her store credit cardsto her bank credit card in the mail. It offered zero percent finance charges/interestfor the first three months (90 days), and an 18.5 percent interest rate thereafter until the balance is paid in full. Upon reading the fine print, she saw there was a $50 transaction fee and interest accrued from he day the balance transfer was made if the balance was not paid in full within the first 90 days.

Required:
a. How could Jamie Lee use this balance transfer offer to her advantage?
b. How is this offer a major disadvantage to Jamie Lee?

Answer 1

Jamie Lee can use the balance transfer offer to consolidate her store credit card balances and avoid interest and fees for the first three months. However, if she does not pay off the balance within the introductory period, she will incur fees and high interest charges.

Step-by-step explanation:

The balance transfer offer can be advantageous for Jamie Lee in the following ways:

1. She can consolidate all her store credit card balances onto one credit card, making it easier to manage her debt.
2. During the first three months, she will not be charged any finance charges or interest, allowing her to make payments towards the principal balance without accruing additional costs.
3. If she pays off the transferred balance in full within the first 90 days, she can avoid the $50 transaction fee and any interest that would accrue after the 90-day period.

This offer can be a major disadvantage for Jamie Lee if:

1. She does not pay off the entire balance within the first 90 days. In this case, she would have to pay the $50 transaction fee and start accruing interest at an 18.5 percent rate.
2. If she continues to carry a balance on the bank credit card beyond the introductory period, the high interest rate of 18.5 percent could lead to significant interest charges over time.

Answer 2

Answer and Explanation:

As in the given situation, Jamie lee have a benefit from the transfer in the case when the interest on the store credit card would be higher than the $50 for the first 90 days

1. If we assume that the date of the payment is one month but she does not have the money to make the payment so she can transfer the balance to the credit card so that she get 2 more months to make the payment

2. This could become the disadvantage when the payment is not done within the 90 days as she have to pay the interest of 18.5% on the tital amount also the transaction fee would also be paid