Emmitt wants to buy a new flat screen television. The cost of the television is $539. He has a credit card with a credit limit of $1,000 and an APR of 22 percent. The store offers him store credit with six months no interest and an APR of 22 percent. This means if he pays the balance in the first six months, he doesn’t pay any interest. If he doesn’t pay off the balance in the first six months, then he starts paying 22 percent interest on the balance thats left. Since he just paid off his car loan, he can afford to pay $100 each month. This means it would be possible for him to pay the balance within six months. He also has a great credit score and could obtain a personal loan. Remember, the goal is to find the most cost-effective option for purchasing the TV. How should Emmitt pay for the television?

Question

jhonyy9 · Answer

what you think what maybe the first step ?

@AZ

Angle · Answer

Let's organize and evaluate the different options

Option 1: Current credit card
Emmitt has a credit card that has a $1000 credit limit and he has to pay 22% APR on this

Option 2: New store credit card
This new credit card offer will put a demporary dent into Emmitt's credit score (and is therefore not recommended if he is looking to purchase a house in the near future). However, the six months of no interest will allow Emmitt to effectively pay no interest on his $539 purchase.

Option 3: Personal loan
Although the APR will be less than the 22% APR of a credit card, there will still be an interest rate (without grace period) on such a personal loan.

I believe our goal here is to select the choice that would allow Emmitt to pay the least amount (or no) interest.