Jim Norton, an engineering junior, was mailed two guaranteed line-of-credit applications from two different banks. Each bank offered a different annual fee and finance charge.
Jim expects his average monthly balance after payment to the bank to be $300 and plans to keep the credit card he chooses for only 24 months. (After graduation, he will apply for a new card.) Jim's interest rate on his savings account is 6% compounded daily. Table ST4.1 lists the terms of each bank:
(a) Compute the effective annual interest rate for each card.
(b) Which bank's credit card should Jim choose?
(c) Suppose Jim decided to go with Bank B and used the card for one year. The balance after one year is $ 1,500. If he makes just a minimum payment each month (say, 5% of the unpaid balance), how long will it take to pay off the card debt? Assume that he will not make any new purchases on the card until he pays off the debt.

B Terms Annual fee Finance charge ank Bank $20 1,55% Monthly interest rate 530 16.5% Annual percentage rate