Emily and Yasmin applied for the same credit card from the same bank. The bank checked both of their FICO scores. Emily had an excellent credit rating and received a card with a monthly interest rate of 1.08%, while Yasmin had a poor credit rating and received a card with a monthly interest rate of 1.83%. If each of them had an average daily balance of $900 for a specific month and had to pay a finance charge, how much more would Yasmin pay than Emily?

Question

27-07-2025
Business

High School

We appreciate your visit to Emily and Yasmin applied for the same credit card from the same bank The bank checked both of their FICO scores Emily had an excellent. This page offers clear insights and highlights the essential aspects of the topic. Our goal is to provide a helpful and engaging learning experience. Explore the content and find the answers you need!

Emily and Yasmin applied for the same credit card from the same bank. The bank checked both of their FICO scores. Emily had an excellent credit rating and received a card with a monthly interest rate of 1.08%, while Yasmin had a poor credit rating and received a card with a monthly interest rate of 1.83%. If each of them had an average daily balance of $900 for a specific month and had to pay a finance charge, how much more would Yasmin pay than Emily?

Answer :

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ritikyaduvanshi059 ritikyaduvanshi059 · Answer 1 · 2024-01-12T23:03:38-05:00

Final answer:

Yasmin would pay an additional $6.75 in finance charges compared to Emily for the month, due to receiving a higher credit card interest rate based on a lower credit score.

Explanation:

To calculate the finance charges for Emily and Yasmin, we first calculate the monthly interest for each by multiplying their respective interest rates by the average daily balance of $900. For Emily, the calculation is $900 × 0.0108 which equals $9.72. For Yasmin, the calculation is $900 × 0.0183 which equals $16.47. By subtracting Emily's finance charge from Yasmin's, we find that Yasmin would pay $16.47 - $9.72 = $6.75 more than Emily.

Credit card interest rates and their impact on the finance charges we pay are significant as they can vary greatly based on individual credit ratings. This example illustrates how a difference in credit score can affect the cost of borrowing, with higher interest rates leading to higher finance charges, thus impacting the overall financial burden on the cardholder.