Quick Real-Life Math Problem:
If you’re a normal student (or former student), you probably have asked yourself why you should know algebra. “I’m not a scientist, engineer, or doctor – what’s the point?” Well, a little algebra can help you make important financial decisions, as I found a little while ago.
I have a credit card that gives me 4% “cash back” when I pay for gasoline using my credit card. Since the bank’s not paying me for advertising, I’m not going to say which bank or credit card it is. ;-)
If you live in California or some other states, you may see most gas stations charge about 10 cents per gallon more for gas paid for by credit card than by cash. So the problem is – when does it become a better idea to pay with a credit card? [Of course, that’s assuming you pay it off at the end of the month – if you can’t do that, NEVER pay with a credit card unless you absolutely have no other choice but to buy the item now. Google “credit card interest compounded daily” for more details. Here’s one result I found: https://www.consumercredit.com/financial-education/financial-calculators/credit-card-interest-calculator But I digress. ]
The problem is simple enough : Just set up the inequality
(P + 0.10)*0.96 < P , where P is the cash price per gallon.
P + $0.10 < P/(0.96)
P +0.10 < 1.0417 P
$0.10 < 0.417 P
$2.40 < P
So if the cash price of the gas is more than $2.40 per gallon (as it does now), you save money with that credit card, even though you have to pay $2.50 when you use the credit card. Math is good!
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Author: John Linneball Who did you think? ;-)
I'm the proprietor and only tutor for this business; that's why I named it after me.