With only a part-time job and the need for a professional wardrobe, Rachel quickly maxed out her credit card the summer after graduation. With her first full-time paycheck in August, she vowed to pay

$290

each month toward paying down her

$7,850

outstanding balance and not to use the card. The card has an annual interest rate of

21

percent. How long will it take Rachel to pay for her wardrobe? Should she shop for a new card? Why or why not?

If Rachel continues to pay

$290

per month, it will take her

enter your response here

months to pay for her wardrobe. (Round to the nearest month.) Should Rachel shop for a new card? Why or why not?

A.

As a typical credit user, Rachel might consider finding a card with the lowest possible interest rate and doing a balance transfer. If a new, lower interest card would be her only new credit, she could save interest and possibly increase her credit score because her

$7,850

balance would represent a lower percentage of her total available credit. However, she should be cautious of acquiring too much new credit or of closing the existing

accountboth

factors could lower her credit score.

B.

As a typical credit user, Rachel might consider finding a card with the lowest possible interest rate and doing a balance transfer. If a new, lower interest card would be her only new credit, she could save interest and possibly increase her credit score because her

$7,850

balance would represent a lower percentage of her total available credit. She would not need to be cautious of acquiring too much new credit or of closing the existing

accountneither

factor would lower her credit score.