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Last year you forgot to pay a total of three department store monthly statements. Two of the three charged you a $35 fee for this and one store charged you $25. You also forgot to pay your monthly credit card bill twice and the credit card company penalized you $30 per oversight and raised the interest rate on your credit card balance of $400 to 18% from 8% for the remaining 4 months of the year. This year you switched to online banking with automatic payment. What did online banking with autopay save you?

User Nesta
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2 Answers

3 votes

Final answer:

By considering department store late fees and the increased credit card interest incurred due to late payments, online banking with autopay saved the individual approximately $168.33 last year.

Step-by-step explanation:

To calculate what online banking with autopay saved you, we have to account for fees from late payments and the additional interest incurred from your credit card debt due to late payments.

For department store late fees, you have two at $35 each and one at $25, totaling $95. For the credit card, you have two late payments at $30 each, summing to $60. Additionally, the increased interest from 8% to 18% for 4 months on a $400 balance implies an extra cost. The difference in the annual interest rate is 10%, so for 4 months (one-third of a year), this translates to $400 x 10% x 1/3 = $13.33 approximately. However, we need to factor in that this interest would compound monthly, which would slightly increase this amount. Given the parameters and simplifying by not compounding monthly, this gives approximately $13.33 extra in interest.

The total amount saved by switching to online banking with autopay would be the sum of $95 + $60 + $13.33, which equals $168.33.

User Melpomene
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4.6k points
3 votes

Answer:

$168

Step-by-step explanation:

User Dienekes
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4.1k points