Question

Assume you have a balance of $3200 on your credit card that you want to pay off. Calculate your monthly paymentand total payment under the given conditions. Assume you make no additional charges to the card.The credit card APR is 21% and you want to pay off the balance in 2 years.

Answer 1

For a credit card with a balance B and annual percentage rate r, the monthly payment P to pay off the balance in n years is given by:

$P=B\frac{\frac{r}{12}(1+\frac{r}{12})^{12n}}{(1+\frac{r}{12})^{12n}-1}$

For B = $3200, r = 0.21 and n = 2 years, we have:

$P=3200\cdot\frac{\frac{0.21}{12}\cdot(1+\frac{0.21}{12})^{24}}{^{(1+\frac{0.21}{12})24}-1}=\text{ \ 164.43}$

Then, the total payment is given by:

$24P=24\cdot164.43=\text{ \ 3946.42}$