Question

Samantha needs cash bad! She is going to use her credit card for a cash advance of

$400. Her credit card terms are 5%/$25. How much will this cost her? (Hint: do not take
APR into consideration, just the actual transaction fee)

Answer 1

Samantha will incur a $25 transaction fee for a $400 cash advance on her credit card since the fee is the greater of 5% of the advance amount or $25.

Step-by-step explanation:

To calculate the cost of the cash advance, we first need to determine the transaction fee. Samantha's credit card terms state a fee of 5%/$25. This means that she will be charged 5% of the cash advance amount or $25, whichever is greater. The student's question asks how much it will cost Samantha to use her credit card for a cash advance of $400 with her credit card terms being 5%/$25. To calculate the cost of the cash advance fee, we use the higher of a percentage of the amount or a flat fee. In this case, 5% of $400 would be $20, but since there is a minimum fee of $25, the actual transaction fee for Samantha would be $25, as it is the higher of the two amounts. The APR is not considered here as per the student's instructions.