Question

Select the correct answer from each drop-down menu. Identify the characteristics of a revolving credit account. Myrna has a revolving credit account. She doesn’t have to pay the entire balance listed in her credit card statement. She can choose to (Option 1) instead. The credit card company will apply (Option 2) on the portion of the balance that she doesn’t pay at the end of the billing cycle.

Answer 1

Myrna has a revolving credit account. She doesn’t have to pay the entire balance listed in her credit card statement. She can choose to make a minimum payment instead. The credit card company will apply interest on the portion of the balance that she doesn’t pay at the end of the billing cycle.

Step-by-step explanation:

Revolving credit accounts, such as credit cards, allow the account holder to carry a balance from one billing cycle to the next. Myrna's option to make a minimum payment means she can pay only a fraction of the total balance listed on her credit card statement. This minimum payment typically covers the interest accrued and a small percentage of the outstanding balance. The remaining balance is carried over to the next billing cycle.

For instance, if Myrna's credit card statement shows a total balance of $1,000 and she chooses to make a minimum payment of 3% of the balance, she would pay $30. The credit card company would then apply interest, which is calculated on the remaining $970 (the original balance minus the minimum payment). This interest is added to the next billing cycle's statement, and Myrna has the option to pay a higher amount or continue making minimum payments.

Over time, if Myrna consistently makes only the minimum payment, the interest can accumulate, and it may take a long time to pay off the original balance. This characteristic of revolving credit accounts emphasizes the importance of managing credit responsibly and understanding the implications of carrying a balance.

Answer 2

Myrna has a revolving credit account. She doesn’t have to pay the entire balance listed in her credit card statement. She can choose to "pay a minimum amount" instead. The credit card company will apply "interest charges" on the portion of the balance that she doesn’t pay at the end of the billing cycle.

Step-by-step explanation:

In a revolving credit account, the cardholder has the flexibility to pay only a minimum amount of the total balance mentioned in the credit card statement. This minimum payment option provides short-term financial relief but incurs interest charges on the remaining balance. Option 1 reflects this flexibility as Myrna can choose to pay a minimum amount.

Option 2 indicates that the credit card company will apply interest charges on the unpaid portion of the balance at the end of the billing cycle. This practice is typical for revolving credit accounts, and the interest charges accumulate on the outstanding balance until it is fully paid.