The cost for a merchant to submit credit card purchases is about 3%.
For this particular question, we will assume it is exactly 3%.
That means that for this question, the auto dealership would get paid 100% minus 3% equaling 97%.
97% of $20,000 is what the dealership would get paid.
You could reach for a calculator, and if there is any absolutely any doubt as to the correct answer, that is what you should do.
For these particular numbers
manyevery one of us can answer this in our heads.
Did I set the question up that way on purpose?
Let's divide and conquer:
The math for $10,000 is relatively easy, so let's divide $20,0000 by 2 so we can work with $10,000.
What is 3% of $10,000?
If you need to think about that answer, what would 3% of $100 be?
3% of $100 is $3.
$100 only has 2 zeros.
We need 4 zeros for $10,000, so multiply our $3 from step 4 by 100 for $300.
Now we need to multiply by 2 to get from $10,000 back to the $20,000 in the exercise.
$20,000 minus ( 2 times $300 ) means $20,000 minus $600 for $19,400.
We could have calculated $10,000 minus $300 for $9,700 then mutliply $9,700 by 2 for the same answer of $19,400, but most of us will find it easier to subtract 2 times $300 from the total.
Divide each side by .97
( $X times .97 ) / .97 = $20,000 / .97
$20,000 / .97 = $20,618.56
It gets worse.
If the customer had financed the car through the dealership, the company lending the money might have paid the dealership a fee.
Using A Credit Card For a Deposit
High revolving credit utilization for consumer if financed on a personal credit card
Either high initial interest rate, or high rate after promotional period.
Opportunity cost from dealer loan.