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

Exercise 9

Balance transfer credit cards. Audrey Grubbs has several credit cards, on which she is carrying a total current balance of $14,500. She is considering transferring this balance to a new card issued by a local bank. The bank advertises that, for a 2 percent fee, she can transfer her balance to a card that charges a 0 percent interest rate on transferred balances for the first nine months. Calculate the fee that Audrey would pay to transfer the balance, and describe the benefits and drawbacks of balance transfer cards.