PFIN 5th Edition by Randall Billingsley,Lawrence Gitman,Michael Joehnk

Exercise 7

Choosing between credit cards. Wyatt Faust recently graduated from college and is evaluating two credit cards. Card A has an annual fee of $75 and an interest rate of 9 percent. Card B has no annual fee and an interest rate of 16 percent. Assuming that Wyatt intends to carry no balance and pay off his charges in full each month, which card represents the better deal? If Wyatt expected to carry a significant balance from one month to the next, which card would be better? Explain.