Refer to the following for Exercises 31-35, about credit card payments. Many credit cards use a similar formula for the minimum payment, which is the new balance (if less than $25), or else the greatest of $25 or 1% of the new balance (excluding interest and late fees), plus the interest billed, rounded down to the nearest dollar. Any late fees are then added on to this calculated amount. Moreover, when any interest is due, there is a minimum charge of $1.50.

Question 22.64

image 34. (Requires a spreadsheet) A well-known national credit card calculates minimum payment due as the new balance (if less than $35), or else the greatest of the following:

  • $35
  • 2% of the new balance (excluding new late fees)
  • Interest charged on the statement plus 1% of the new balance (excluding late fees and new interest charged on the statement), not to exceed 4% of the new balance

Then any late fees are added and the total is rounded to the nearest whole dollar.

  1. With a monthly interest rate of 1.5%, how many months will it take to pay off a new balance of $5000 by making the minimum payment each month?
  2. How much will you pay altogether?