Question

You have a $10000 balance on your credit card, which charges 1% per month. If you can afford to pay $100 per month, how many months will it take to pay the credit card in full?

Answer 1

Amount Outstanding = $10,000

Monthly Rate = 1%

Monthly Payments = $100

Put the values in financial calculator as follows :

PV = 10,000

I/Y = 1

PMT = $100

Press CPT and press N to find number of months.

Number of months are coming out to be infinity.

It is clear if you are paying 1% on your 10,000 loan i.e interest is $100 and you are paying $100 each month. You will end up paying $100 interest every month. and your principal amount will never come down and hence, your interest will never come down.