GMAT Question of the Day - Daily to your Mailbox; hard ones only

It is currently 23 Jan 2019, 09:53

Close

GMAT Club Daily Prep

Thank you for using the timer - this advanced tool can estimate your performance and suggest more practice questions. We have subscribed you to Daily Prep Questions via email.

Customized
for You

we will pick new questions that match your level based on your Timer History

Track
Your Progress

every week, we’ll send you an estimated GMAT score based on your performance

Practice
Pays

we will pick new questions that match your level based on your Timer History

Not interested in getting valuable practice questions and articles delivered to your email? No problem, unsubscribe here.

Close

Request Expert Reply

Confirm Cancel
Events & Promotions in January
PrevNext
SuMoTuWeThFrSa
303112345
6789101112
13141516171819
20212223242526
272829303112
Open Detailed Calendar
  • Key Strategies to Master GMAT SC

     January 26, 2019

     January 26, 2019

     07:00 AM PST

     09:00 AM PST

    Attend this webinar to learn how to leverage Meaning and Logic to solve the most challenging Sentence Correction Questions.
  • Free GMAT Number Properties Webinar

     January 27, 2019

     January 27, 2019

     07:00 AM PST

     09:00 AM PST

    Attend this webinar to learn a structured approach to solve 700+ Number Properties question in less than 2 minutes.

Most banks that issue credit cards charge interest rates on credit car

  new topic post reply Question banks Downloads My Bookmarks Reviews Important topics  
Author Message
TAGS:

Hide Tags

 
Senior SC Moderator
User avatar
V
Joined: 14 Nov 2016
Posts: 1321
Location: Malaysia
GMAT ToolKit User Premium Member
Most banks that issue credit cards charge interest rates on credit car  [#permalink]

Show Tags

New post 21 Jun 2018, 16:20
24
00:00
A
B
C
D
E

Difficulty:

  35% (medium)

Question Stats:

71% (01:38) correct 29% (01:55) wrong based on 1014 sessions

HideShow timer Statistics

GMAT® Official Guide Verbal Review 2019

Practice Question
Question No.: CR 152
Online test bank question number : CR00677

Most banks that issue credit cards charge interest rates on credit card debt that are ten percentage points higher than the rates those banks charge for ordinary consumer loans. These banks’ representatives claim the difference is fully justified, since it simply covers the difference between the costs to these banks associated with credit card debt and those associated with consumer loans.

Which of the following, if true, most seriously calls into question the reasoning offered by the banks’ representatives?

(A) Some lenders that are not banks offer consumer loans at interest rates that are even higher than most banks charge on credit card debt.

(B) Most car rental companies require that their customers provide signed credit card charge slips or security deposits.

(C) Two to three percent of the selling price of every item bought with a given credit card goes to the bank that issued that credit card.

(D) Most people need not use credit cards to buy everyday necessities, but could buy those necessities with cash or pay by check.

(E) People who pay their credit card bills in full each month usually pay no interest on the amounts they charge.

Argument Evaluation

Situation

Banks that issue credit cards tend to charge interest rates on the associated debt that are ten percentage points higher than the rates associated with “ordinary” consumer loans (consumer loans that are not associated with credit cards). Representatives of these banks have offered a justification of this practice, based on a claim that this difference in interest rates “simply covers the difference” in costs, to the banks, associated with these respective types of loans (loans associated with credit cards and consumer loans that are not associated with credit cards).

Reasoning

What additional facts would indicate a flaw in the bank representatives’ argument? Given the description of the bank representatives’ argument, we may assume that, by their estimation, the costs to banks associated with credit card debt are greater than the costs associated with other consumer loans. The representatives’ argument, that the difference in interest rates “simply covers” this difference in costs, may then be seen as an argument that all of the extra money that the banks collect from the higher interest rates is necessary if the banks are to cover this difference in costs. If we can find a fact whereby the ten percentage point difference is not necessary to cover the difference in costs, then we may be able to “call into question” the bank representatives’ argument.

A. The point of this response to the bank representatives’ argument would seem to be that the relatively high interest rates on credit debt may be justified because certain other businesses charge even higher interest rates on consumer loans. Regardless of the merits of this response, it appears intended to support the argument of the representatives, whereas our task is to identify a fact that could be used to criticize the argument.

B. This purported fact does not address the argument concerning the interest rates on credit-card debt.

C. Correct. If two to three percent of the value of purchases made on credit cards goes to the issuing banks, then this money could be used to cover some of the difference in costs described by the bank representatives. The interest rates on credit cards could therefore be somewhat lower than they actually are, with the difference in costs nevertheless still fully covered. The difference in interest rates of ten percentage points may therefore not be necessary.

D. This point might be used in support of an argument that consumers have a genuine choice as to whether to use credit cards, and that they are therefore responsible for the higher rates of interest that they pay for credit-card debt. Such an argument would seem to support the position of bank representatives.

E. As with the point in option D, this point might seem to suggest that consumers bear some of the responsibility for the higher interest rates they pay, thus perhaps mitigating the responsibility of the banks. The point might thus seem to support the position of the banks’ representatives.

The correct answer is C.

_________________

"Be challenged at EVERY MOMENT."

“Strength doesn’t come from what you can do. It comes from overcoming the things you once thought you couldn’t.”

"Each stage of the journey is crucial to attaining new heights of knowledge."

Rules for posting in verbal forum | Please DO NOT post short answer in your post!

Advanced Search : https://gmatclub.com/forum/advanced-search/

Most Helpful Community Reply
Manager
Manager
User avatar
S
Joined: 10 Jun 2016
Posts: 81
Location: India
Concentration: Operations, Strategy
GMAT 1: 710 Q49 V37
GPA: 3.3
WE: Project Management (Energy and Utilities)
GMAT ToolKit User Premium Member Reviews Badge
Re: Most banks that issue credit cards charge interest rates on credit car  [#permalink]

Show Tags

New post 21 Jun 2018, 23:43
4
1
Premise: The interest rates on credit card charges are 10 percentage points higher than those on consumer loans.
Banks’ representatives: “These high rates are justified.”
Reasoning given by Banks’ representatives: “this difference in interest rates only covers the costs associated with credit cards.

We have to attack this reasoning and prove that the this move is not justified.

Pre-thinking:
What could make us believe that these higher interest rates are not justified? Something that says there are ways other than increasing interest rates in which the banks can cover their costs.

Option C shows an alternate way in which the banks can cover their costs (fully or partially) apart from increasing the interest rates by 10 percentage points.

Posted from my mobile device
_________________

"Success is a lousy teacher. It seduces smart people to think they can't lose" - Bill Gates.

General Discussion
Manager
Manager
avatar
G
Joined: 31 Jul 2017
Posts: 191
Location: India
Concentration: General Management, Leadership
GMAT 1: 500 Q47 V15
GPA: 3.4
WE: Information Technology (Computer Software)
Premium Member Reviews Badge CAT Tests
Re: Most banks that issue credit cards charge interest rates on credit car  [#permalink]

Show Tags

New post 21 Jun 2018, 17:18
1
hazelnut wrote:
CR00677
Most banks that issue credit cards charge interest rates on credit card debt that are ten percentage points higher than the rates those banks charge for ordinary consumer loans. These banks’ representatives claim the difference is fully justified, since it simply covers the difference between the costs to these banks associated with credit card debt and those associated with consumer loans.

Which of the following, if true, most seriously calls into question the reasoning offered by the banks’ representatives?

(A) Some lenders that are not banks offer consumer loans at interest rates that are even higher than most banks charge on credit card debt.

(B) Most car rental companies require that their customers provide signed credit card charge slips or security deposits.

(C) Two to three percent of the selling price of every item bought with a given credit card goes to the bank that issued that credit card.

(D) Most people need not use credit cards to buy everyday necessities, but could buy those necessities with cash or pay by check.

(E) People who pay their credit card bills in full each month usually pay no interest on the amounts they charge.


IMO E is the ans.

(A) Some lenders that are not banks offer consumer loans at interest rates that are even higher than most banks charge on credit card debt.
Lenders that are not bank => Irrelevant.

(B) Most car rental companies require that their customers provide signed credit card charge slips or security deposits.
customers provide signed credit card charge slips or security deposits. - Irrelevant

(C) Two to three percent of the selling price of every item bought with a given credit card goes to the bank that issued that credit card.
This at worst strengthens the argument

(D) Most people need not use credit cards to buy everyday necessities, but could buy those necessities with cash or pay by check.
need not use credit cards to buy everyday necessities - This is again out of scope

(E) People who pay their credit card bills in full each month usually pay no interest on the amounts they charge.
People pay no interest on the amounts bank charges. This breaks the reasoning of Bank. Hence Weakens the argument. Correct

Let me know if my understanding is incorrect.
_________________

If it helps you please press Kudos!

Thank You
Sudhanshu

Intern
Intern
avatar
B
Joined: 31 Mar 2018
Posts: 24
CAT Tests
Re: Most banks that issue credit cards charge interest rates on credit car  [#permalink]

Show Tags

New post 21 Jun 2018, 20:55
SSM700plus wrote:
hazelnut wrote:
CR00677
Most banks that issue credit cards charge interest rates on credit card debt that are ten percentage points higher than the rates those banks charge for ordinary consumer loans. These banks’ representatives claim the difference is fully justified, since it simply covers the difference between the costs to these banks associated with credit card debt and those associated with consumer loans.

Which of the following, if true, most seriously calls into question the reasoning offered by the banks’ representatives?

(A) Some lenders that are not banks offer consumer loans at interest rates that are even higher than most banks charge on credit card debt.

(B) Most car rental companies require that their customers provide signed credit card charge slips or security deposits.

(C) Two to three percent of the selling price of every item bought with a given credit card goes to the bank that issued that credit card.

(D) Most people need not use credit cards to buy everyday necessities, but could buy those necessities with cash or pay by check.

(E) People who pay their credit card bills in full each month usually pay no interest on the amounts they charge.


IMO E is the ans.

(A) Some lenders that are not banks offer consumer loans at interest rates that are even higher than most banks charge on credit card debt.
Lenders that are not bank => Irrelevant.

(B) Most car rental companies require that their customers provide signed credit card charge slips or security deposits.
customers provide signed credit card charge slips or security deposits. - Irrelevant

(C) Two to three percent of the selling price of every item bought with a given credit card goes to the bank that issued that credit card.
This at worst strengthens the argument

(D) Most people need not use credit cards to buy everyday necessities, but could buy those necessities with cash or pay by check.
need not use credit cards to buy everyday necessities - This is again out of scope

(E) People who pay their credit card bills in full each month usually pay no interest on the amounts they charge.
People pay no interest on the amounts bank charges. This breaks the reasoning of Bank. Hence Weakens the argument. Correct

Let me know if my understanding is incorrect.








Could you tell me the meaning of this question?
Is this asking for strengthening or weakening the argument?

Posted from my mobile device
Manager
Manager
avatar
G
Joined: 31 Jul 2017
Posts: 191
Location: India
Concentration: General Management, Leadership
GMAT 1: 500 Q47 V15
GPA: 3.4
WE: Information Technology (Computer Software)
Premium Member Reviews Badge CAT Tests
Re: Most banks that issue credit cards charge interest rates on credit car  [#permalink]

Show Tags

New post 21 Jun 2018, 21:44
viveknegi wrote:

Could you tell me the meaning of this question?
Is this asking for strengthening or weakening the argument?

Posted from my mobile device


Hi viveknegi

It is weakening Question. It asks you to find the flaw in the reasoning. So basically it asks us to weaken the argument.

Hope it helps!!
_________________

If it helps you please press Kudos!

Thank You
Sudhanshu

Intern
Intern
avatar
B
Joined: 22 May 2018
Posts: 35
WE: Project Management (Energy and Utilities)
GMAT ToolKit User CAT Tests
Re: Most banks that issue credit cards charge interest rates on credit car  [#permalink]

Show Tags

New post 21 Jun 2018, 21:57
1
IMO C

Conclusion: Interest rates on credit card debt that are ten percentage points higher than the rates those banks charge for ordinary consumer loans
Premise: it simply covers the difference between the costs to these banks associated with credit card debt and those associated with consumer loans

Option C: Two to three percent of the selling price of every item bought with a given credit card goes to the bank that issued that credit card- this actually links both premise and conclusion and weakens the arguement

Option A, B , D are irrelevant
And E- is attacking only the premise but not considering the whole argument

Sent from my Lenovo X3a40 using GMAT Club Forum mobile app
Manager
Manager
avatar
G
Joined: 31 Jul 2017
Posts: 191
Location: India
Concentration: General Management, Leadership
GMAT 1: 500 Q47 V15
GPA: 3.4
WE: Information Technology (Computer Software)
Premium Member Reviews Badge CAT Tests
Re: Most banks that issue credit cards charge interest rates on credit car  [#permalink]

Show Tags

New post 21 Jun 2018, 22:11
mnav wrote:
IMO C

Conclusion: Interest rates on credit card debt that are ten percentage points higher than the rates those banks charge for ordinary consumer loans
Premise: it simply covers the difference between the costs to these banks associated with credit card debt and those associated with consumer loans

Option C: Two to three percent of the selling price of every item bought with a given credit card goes to the bank that issued that credit card- this actually links both premise and conclusion and weakens the arguement

Option A, B , D are irrelevant
And E- is attacking only the premise but not considering the whole argument

Sent from my Lenovo X3a40 using GMAT Club Forum mobile app


mnav - you are correct about E. But E is attacking the premise and thus weakening the argument.

How in Choice C : Two to three percent of the selling price of every item bought with a given credit card goes to the bank
weakens the conclusion Interest rates on credit card debt that are ten percentage points higher than the rates those banks charge.

We don't have any information to confirm that 2-3 % of S.P is providing lesser or no benefit to banks.

Whereas in E, we can be sure that since consumer is not paying any interest, banks are not benefiting from this.

Let's wait for OA and OE to understand if our argument is correct.
_________________

If it helps you please press Kudos!

Thank You
Sudhanshu

Intern
Intern
avatar
B
Joined: 22 May 2018
Posts: 35
WE: Project Management (Energy and Utilities)
GMAT ToolKit User CAT Tests
Re: Most banks that issue credit cards charge interest rates on credit car  [#permalink]

Show Tags

New post 21 Jun 2018, 23:59
SSM700plus wrote:
mnav wrote:
IMO C

Conclusion: Interest rates on credit card debt that are ten percentage points higher than the rates those banks charge for ordinary consumer loans
Premise: it simply covers the difference between the costs to these banks associated with credit card debt and those associated with consumer loans

Option C: Two to three percent of the selling price of every item bought with a given credit card goes to the bank that issued that credit card- this actually links both premise and conclusion and weakens the arguement

Option A, B , D are irrelevant
And E- is attacking only the premise but not considering the whole argument

Sent from my Lenovo X3a40 using GMAT Club Forum mobile app


mnav - you are correct about E. But E is attacking the premise and thus weakening the argument.

How in Choice C : Two to three percent of the selling price of every item bought with a given credit card goes to the bank
weakens the conclusion Interest rates on credit card debt that are ten percentage points higher than the rates those banks charge.

We don't have any information to confirm that 2-3 % of S.P is providing lesser or no benefit to banks.

Whereas in E, we can be sure that since consumer is not paying any interest, banks are not benefiting from this.

Let's wait for OA and OE to understand if our argument is correct.
Hi

IMO Option E is also wrong because it is strengthening the bank's representative statement that credit card costs are higher than consumer loans because they give credit for atleast some period at zero interest rate. Option C says that difference in costs is reduced


Sent from my Lenovo X3a40 using GMAT Club Forum mobile app
Manager
Manager
User avatar
G
Status: EAT SLEEP GMAT REPEAT!
Joined: 28 Sep 2016
Posts: 167
Location: India
GMAT ToolKit User Reviews Badge
Re: Most banks that issue credit cards charge interest rates on credit car  [#permalink]

Show Tags

New post Updated on: 22 Jun 2018, 01:47
Hi chetan2u

Please help in answering this. I went with C.

hazelnut wrote:
GMAT® Official Guide Verbal Review 2019

Practice Question
Question No.: SC
Online test bank question number : CR00677

Most banks that issue credit cards charge interest rates on credit card debt that are ten percentage points higher than the rates those banks charge for ordinary consumer loans. These banks’ representatives claim the difference is fully justified, since it simply covers the difference between the costs to these banks associated with credit card debt and those associated with consumer loans.

Which of the following, if true, most seriously calls into question the reasoning offered by the banks’ representatives?

(A) Some lenders that are not banks offer consumer loans at interest rates that are even higher than most banks charge on credit card debt.

(B) Most car rental companies require that their customers provide signed credit card charge slips or security deposits.

(C) Two to three percent of the selling price of every item bought with a given credit card goes to the bank that issued that credit card.

(D) Most people need not use credit cards to buy everyday necessities, but could buy those necessities with cash or pay by check.

(E) People who pay their credit card bills in full each month usually pay no interest on the amounts they charge.

_________________

Regards,
Adi


Originally posted by Adi93 on 22 Jun 2018, 01:41.
Last edited by Adi93 on 22 Jun 2018, 01:47, edited 1 time in total.
Manager
Manager
avatar
S
Joined: 11 Feb 2018
Posts: 212
GMAT 1: 690 Q47 V37
GMAT 2: 710 Q50 V36
GMAT 3: 750 Q50 V42
Re: Most banks that issue credit cards charge interest rates on credit car  [#permalink]

Show Tags

New post 22 Jun 2018, 01:45
1
Another for C.E doesnt do much.C is saying 10% points increase is not fully justified as credit card companies get some amount during purchase.E infact strengthens the argument by saying that the extra costs are infact justified

Posted from my mobile device
Math Expert
User avatar
V
Joined: 02 Aug 2009
Posts: 7213
Re: Most banks that issue credit cards charge interest rates on credit car  [#permalink]

Show Tags

New post 22 Jun 2018, 02:56
2
Adi93 wrote:
Hi chetan2u

Please help in answering this. I went with C.

hazelnut wrote:
GMAT® Official Guide Verbal Review 2019

Practice Question
Question No.: SC
Online test bank question number : CR00677

Most banks that issue credit cards charge interest rates on credit card debt that are ten percentage points higher than the rates those banks charge for ordinary consumer loans. These banks’ representatives claim the difference is fully justified, since it simply covers the difference between the costs to these banks associated with credit card debt and those associated with consumer loans.

Which of the following, if true, most seriously calls into question the reasoning offered by the banks’ representatives?

(A) Some lenders that are not banks offer consumer loans at interest rates that are even higher than most banks charge on credit card debt.

(B) Most car rental companies require that their customers provide signed credit card charge slips or security deposits.

(C) Two to three percent of the selling price of every item bought with a given credit card goes to the bank that issued that credit card.

(D) Most people need not use credit cards to buy everyday necessities, but could buy those necessities with cash or pay by check.

(E) People who pay their credit card bills in full each month usually pay no interest on the amounts they charge.



Hi Adi93,
It is clear cut C...

The question is about the difference in the rates of interest rates that banks charge on credit card debt and loans..
The official claims it is because of the associated costs that are incurred on the two..

All except C are nowhere close..

C tells us that apart from the costs involved, there is a certain amount the banks get from the shops using the card which is almost 2-3 %, much more than the difference in interest of 10 basis point or 0.1% between the two..
Not required to know the basis points but the choice clearly gives a way these banks are earning on the use of credit card.

Since few have taken E as the answer..
It is out of context and at best agrees with official so opposite of what we are looking for..
So if there are a lot of people not paying any interest on the amount used, these interest too has to be recovered from late payers or credit card debt..
Thus justified in a way for extra 10 basis points...

Clear answer C
_________________

1) Absolute modulus : http://gmatclub.com/forum/absolute-modulus-a-better-understanding-210849.html#p1622372
2)Combination of similar and dissimilar things : http://gmatclub.com/forum/topic215915.html
3) effects of arithmetic operations : https://gmatclub.com/forum/effects-of-arithmetic-operations-on-fractions-269413.html


GMAT online Tutor

Intern
Intern
avatar
B
Joined: 31 Mar 2018
Posts: 24
CAT Tests
Re: Most banks that issue credit cards charge interest rates on credit car  [#permalink]

Show Tags

New post 26 Jun 2018, 03:32
SSM700plus wrote:
viveknegi wrote:

Could you tell me the meaning of this question?
Is this asking for strengthening or weakening the argument?

Posted from my mobile device


Hi viveknegi

It is weakening Question. It asks you to find the flaw in the reasoning. So basically it asks us to weaken the argument.

Hope it helps!!


thank you
Manager
Manager
avatar
S
Joined: 29 Sep 2017
Posts: 114
Location: United States
Concentration: Strategy, Leadership
GMAT 1: 720 Q49 V39
GPA: 3.3
WE: Consulting (Consulting)
GMAT ToolKit User Reviews Badge
Re: Most banks that issue credit cards charge interest rates on credit car  [#permalink]

Show Tags

New post 07 Aug 2018, 18:36
Don't like any of them, but one must be right and that must be C. All others are out-of-scope. C is also poor because there isn't information to support that the 2-3% greatly reduces the difference in cost to the banks, but that's over engineering it.
_________________

If this helped, please give kudos!

Intern
Intern
avatar
Joined: 28 Mar 2018
Posts: 1
CAT Tests
Re: Most banks that issue credit cards charge interest rates on credit car  [#permalink]

Show Tags

New post 07 Aug 2018, 18:48
I'd say C too for the same reasons as redskull1.

Sent from my Pixel 2 XL using GMAT Club Forum mobile app
Intern
Intern
avatar
B
Joined: 13 Aug 2018
Posts: 4
Concentration: Strategy, General Management
GPA: 3.3
WE: Consulting (Consulting)
Re: Most banks that issue credit cards charge interest rates on credit car  [#permalink]

Show Tags

New post 27 Aug 2018, 10:24
I don't understand the logic behind C
Orion Director of Academics
User avatar
S
Joined: 19 Jul 2018
Posts: 97
Re: Most banks that issue credit cards charge interest rates on credit car  [#permalink]

Show Tags

New post 27 Aug 2018, 10:33
Hey Shivikaa04 --

The key here is to look directly at the conclusion that the banks reach - the reason that they charge the increased interest is simply to account for the difference in what it costs them to carry that debt. There are a couple gaps in this logic, but the most obvious is this: what if the bank isn't just making money from the difference in interest rates - what if they have some other revenue from offering credit cards? C fits that perfectly -- If the bank is already making 2 - 3% off every purchase (which they wouldn't make off another purchase), then they are already seriously offsetting the risk that they're carrying. It doesn't destroy the argument, but it does call into question the idea that charging high interest rates is the only way for them to recoup their costs, especially since not all credit card users are going to be carrying debt from month to month.
_________________

Laura
Academics Aficionado | ORION
GMAT self-study has never been more personalized or more fun. Try ORION Free!

Manager
Manager
avatar
S
Joined: 24 Sep 2018
Posts: 139
Premium Member CAT Tests
Re: Most banks that issue credit cards charge interest rates on credit car  [#permalink]

Show Tags

New post 05 Oct 2018, 11:35
Shivikaa04 wrote:
I don't understand the logic behind C


Dear Shivikaa04
Happy to help you on this,

Quote:
Most banks that issue credit cards charge interest rates on credit card debt that are ten percentage points higher than the rates those banks charge for ordinary consumer loans. These banks’ representatives claim the difference is fully justified, since it simply covers the difference between the costs to these banks associated with credit card debt and those associated with consumer loans.

The bank representative's claim: the difference is fully justified, since it simply covers the difference between the costs to these banks associated with credit card debt and those associated with consumer loans.
Premises: Most banks that issue credit cards charge interest rates on credit card debt that are ten percentage points higher than the rates those banks charge for ordinary consumer loans

Hence in order to weaken this claim by the bank's representatives we need to show that there are other sources from which the difference between the costs may be covered.

Quote:
Which of the following, if true, most seriously calls into question the reasoning offered by the banks’ representatives?
You basically need to weaken the bank's representatives claim.

Quote:
(A) Some lenders that are not banks offer consumer loans at interest rates that are even higher than most banks charge on credit card debt.

(B) Most car rental companies require that their customers provide signed credit card charge slips or security deposits.
Absolutely out of scope. In first we aren't concerned what other lenders, who aren't bank, do.
Second certainly shows the value that credit card holds in the eyes of people as ready money, but has nothing to do with the bank representative's claim.

Quote:
(C) Two to three percent of the selling price of every item bought with a given credit card goes to the bank that issued that credit card.
If 2 or 3 percent of selling price of every item bought with a given credit card goes to the bank that issued that credit card. Then this clearly shows that bank representative make false claim about covering the cost of credit card debt. In such a case even if they keep the same interest rate of credit card debt and ordinary consumer loan debt, still they would end up earning an incentives on credit card debt through sales people make using the credit card.

Quote:
(D) Most people need not use credit cards to buy everyday necessities, but could buy those necessities with cash or pay by check.
Great then do use the cash, who stops you. Banks don't care for you guys. But banks won't stop either to call you and bug you for getting a credit card issued. :lol: Out of scope.

Quote:
(E) People who pay their credit card bills in full each month usually pay no interest on the amounts they charge.
This rather strengthen the argument that bank representative's make. If people use the credit card free of cost, then how do banks cover the operational costs of credit card as a financial product offered by banks..
_________________

Please award :thumbup: kudos, If this post helped you in someway. :student_man:

Intern
Intern
avatar
Joined: 12 Nov 2018
Posts: 1
Re: Most banks that issue credit cards charge interest rates on credit car  [#permalink]

Show Tags

New post 17 Dec 2018, 22:08
I think C is denying what the banks’ representative said.
The given passage said that the 10% only covers the cost. I thought it is not ok to weaken the statement by saying “no, it’s not 10%, it’s 7%”. I thought we have to accept the given passages as truth

Posted from my mobile device
Veritas Prep GMAT Instructor
User avatar
D
Joined: 16 Oct 2010
Posts: 8810
Location: Pune, India
Re: Most banks that issue credit cards charge interest rates on credit car  [#permalink]

Show Tags

New post 17 Dec 2018, 23:03
2
Xue wrote:
I think C is denying what the banks’ representative said.
The given passage said that the 10% only covers the cost. I thought it is not ok to weaken the statement by saying “no, it’s not 10%, it’s 7%”. I thought we have to accept the given passages as truth

Posted from my mobile device



Bank Rep: The 10 percentage points higher rate is justified since it covers the difference between the costs of credit card debt vs consumer loans.

To doubt the reasoning, we need to find why the higher rate may not be justified.

We are given that 10 percentage points is the diff between the costs of credit card debt vs consumer loans. But the 10 percentage points higher rate may not be justified since the bank earns other income from credit card i.e. 2-3% of selling price of every item.
(C) doesn't question whether the extra cost of credit card debt is 10 percentage points. It questions whether it is justified to retrieve the entire 10 percentage points cost difference through higher interest. Since credit card does offer extra revenue, it calls into question the justification of directly charging 10 percentage points extra.
_________________

Karishma
Veritas Prep GMAT Instructor

Learn more about how Veritas Prep can help you achieve a great GMAT score by checking out their GMAT Prep Options >

GMAT Club Bot
Re: Most banks that issue credit cards charge interest rates on credit car &nbs [#permalink] 17 Dec 2018, 23:03
Display posts from previous: Sort by

Most banks that issue credit cards charge interest rates on credit car

  new topic post reply Question banks Downloads My Bookmarks Reviews Important topics  


Copyright

GMAT Club MBA Forum Home| About| Terms and Conditions and Privacy Policy| GMAT Club Rules| Contact| Sitemap

Powered by phpBB © phpBB Group | Emoji artwork provided by EmojiOne

Kindly note that the GMAT® test is a registered trademark of the Graduate Management Admission Council®, and this site has neither been reviewed nor endorsed by GMAC®.