Kanya has a credit card that gives a 6% discount on every purchase and free shipping when used online. The annual percentage rate on the credit card is 12%. Kanya wants to buy a laptop that costs $420. Which statement about the cost of the laptop is true?
The Correct Answer and Explanation is:
Correct Answer:
Kanya will pay less than $420 for the laptop if she uses her credit card and pays off the balance in full immediately.
Explanation
Kanya is considering buying a laptop that costs $420. Her credit card offers a 6% discount on every purchase and free shipping when used online. The card also carries a 12% annual percentage rate (APR), which is the interest charged if the balance is not paid in full.
Let’s first calculate the immediate discount:
6% of $420 = 0.06 × 420 = $25.20
So, the discounted price Kanya would pay is:
$420 – $25.20 = $394.80
This is the amount she would owe on her credit card immediately after purchase. If she pays off the full $394.80 before the due date, she will not incur any interest, because most credit cards have a grace period (usually 21–25 days) during which no interest is charged on new purchases if the full balance is paid.
Therefore, if Kanya pays the full amount before interest is applied, she will have saved $25.20 on the laptop due to the discount and also avoided any shipping costs. In this case, she ends up paying less than $420 total.
However, if she does not pay the balance in full and allows it to carry over into the next billing cycle, the 12% APR will begin to accrue on the unpaid amount. Over time, interest could exceed the savings from the 6% discount, increasing the total cost beyond $420.
But since the question focuses on the initial cost and possible outcomes, the most accurate statement is:
Kanya will pay less than $420 if she uses her credit card and pays off the balance immediately.
This takes into account the discount and free shipping while avoiding the interest charges.
