Question

On August 10, a credit card account had a balance of $335. A purchase of $52 was made on August 15, and $161 was charged on August 27. A payment of $79 was made on August 15. The interest on the average daily balance is 1.35% per month. Find the finance charge on the September 10 bill. (Round your answer to two decimal places.)

Answer 1

1) COMPUTATION OF AVERAGE DAILY BALANCE

Average daily balance = Sum of the total amounts owed each day of the month / Number of days in the   billing period

Date	Payments or Purchases	Balance each day	Number of days until balance changes	Unpaid balance times number of days
August 10 - August 14		$335	5	$1,675
August 15 - August 26	$52 - $79	$308	12	$3,696
August 27 - September 9	$161	$469	14	$6,566
TOTAL			31	$11,937

Average daily balance = $11,937 / 31

= $385.06

2) COMPUTATION OF FINANCE CHARGE

I = Prt

I = Evaluating Finance Charge

I = 385.06 X 1.35 / 100 X 1

= $5.20

Finance Charge on Credit card is $5.20