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Recently credit card companies have come under attack by consumer groups who argue that the interest rates charged by these companies are unconsciously high. In fact the rates are generally several percentage points above those charged by banks for ordinary personal loans. But consumer groups overlook the fact that credit cards afford the user great flexibility. A user can purchase an item while it is on sale. So the lower cost of the item offsets the extra cost of the credit.
The argument above makes which of the following assumptions?
Answer Choices :
(A) The cost savings of buying an item at a reduced price are at least equal to the excess interest that a consumer pays on purchases made with a credit card.
(B) A credit card application is not rejected unless the applicant has a long history of late payments and other credit problems.
(C) The prices of items on sale purchased by consumers are still sufficiently high to enable sellers to recoup their costs and make a modest profit.
(D) The consumers who make purchase of sale items with credit cards are persons who might not qualify for bank loans with a lower interest rate.
(E) The average outstanding balance of the ordinary credit card user is no greater than total non-credit debt to the credit card user.
I am going with A. While I was reading the passage, I made a note to myself that the argument will hold true if savings from the item on sale are greater than the interest charged by the credit card. I was surprised to see the same assumption in the first answer choice! I didn't really read the rest of the answer choices...
Actually, I was looking for something like this for an assumption "when items are on sale, those with credit cards buy them with their credit cards"... Something that shows that credit card holders would take advantage of it...
Check out this awesome article about Anderson on Poets Quants, http://poetsandquants.com/2015/01/02/uclas-anderson-school-morphs-into-a-friendly-tech-hub/ . Anderson is a great place! Sorry for the lack of updates recently. I...