Question

Credit card A has an annual fee of $50 but

gives you a rebate at the end of the year of
2% of your total purchases. Credit card B has
no annual fee or rebate. If you spend about
$150 a month, which card is better for you?
(Example 3)

Answer 1

Credit card B is better for you.

Explanation:

To find the total amount of money you'll spend using card A:

($150 * 12) = $1800 (spent, so we'll add that to our total spent)

$1800 * 0.02 = $36 (gained, so we'll subtract that from our total spent)

$50 (spent, so we'll add that to our total spent)

Put these together and we get...

1800 - 36 + 50 = $1814 spent throughout the year

To find the total amount of money you'll spend using card B:

$150 * 12 = $1800 (spent)

1800 < 1814, meaning card B allows you to spend less (better)