Question

Maia has a credit card balance of $5,250. The interest rate on this card is 15%. Currently, she has budgeted to pay $75 per month. Her brother told her that if she would give up her weekly manicure, she could increase her monthly payment to $175. How much will she save if she takes her brother's advice?

a. $0
b. $100
c. $200
d. $300

Answer 1

Maia will save $100 per month if she takes her brother's advice.

Step-by-step explanation:

To calculate how much Maia will save if she takes her brother's advice to increase her monthly payment, we need to first find out how much interest she is paying currently. With a credit card balance of $5,250 and an interest rate of 15%, the annual interest she will pay is 15% of $5,250, which is $787.50. This means that the monthly interest is $787.50 divided by 12, which is approximately $65.62.

Currently, Maia is budgeting to pay $75 per month, so $75 - $65.62 = $9.38 is going towards paying off the principal balance. If she increases her monthly payment to $175, then $175 - $65.62 = $109.38 is going towards paying off the principal balance.

Therefore, Maia will save $109.38 - $9.38 = $100 per month if she takes her brother's advice.