Question

Using the unpaid balance​ method, find the current​ month's finance charge on a credit card account having the following transactions.

 Last​ month's balance: ​$530    

Last​ payment: ​$180   

Annual Interest​ rate: 18​%   ​

Purchases:  ​$582   ​

Returns: ​$317

Answer 1

By this method we need to calculate the finance charge on the previous month closing balance

So the last month balance is $530

So annual rate = = 18%

So monthly rate = 18% /12 = 1.5%

finance charge = Px t x r

So finance charge = 530 x (1) x (1.5/100)

finance charge = 530 x 0.015

finance charge = $7.95

so new balance amount = 530 + 7.95 = 537.95

now last payment is $180 is deducted from previous balance

so 537.95 - 180 = $357.95

now the purchases of $582 which was added to the balance

so 357.95 + 582 = $939.95

now returns of $317 which is deducted from previous balance

so 939.95 - 317 = 622.95

now closing balance of the month is $622.95

finance charge = Px t x r

So finance charge = 622.95 x (1) x (1.5/100)

finance charge = 622.95 x 0.015

finance charge = $9.34425 ~ $9.35

so new balance amount = 622.95 + 9.35 = $632.3