You owe $2,154.35 on your PBnJ credit card that has an interest rate of 9.85% APR. Rather than placing $435.00 into a savings account earning a 2.5% APR, you pay down the principal at the beginning of the month on the credit card. How much interest did you save? Round any decimals to the nearest penny. (Hint: Calculate the difference between the interest you would earn from the savings account and the interest you would pay on your credit card for the $435.00.)
First, calculate the interest you would pay on the credit card if you did not make a payment:
$2,154.35 * 0.0985 = $212.28
Next, calculate the interest you would earn on the savings account:
$435.00 * 0.025 = $10.88
Now, calculate the total interest saved:
$212.28 - $10.88 = $201.40
Therefore, you would save $201.40 in interest by paying down $435.00 on your credit card at the beginning of the month.