Question

If you are trying to build credit by using a credit card, each time you make a purchase with the credit card, deduct that amount from your checking account. That way, when your credit card bill is due, you will have enough to pay the credit card off in full. Kathy Lehner is going to start doing this. She plans on paying her credit card bill in full this month. How much does she owe with a 9% APR and the following transactions? (Round your answer to the nearest cent.)

10/1	Previous balance					$ 1,178
10/3	Credit	$	65		cr.
10/12	Charge: King Soopers	$	162
10/15	Payment	$	450		cr.
10/25	Charge: Delta	$	335
10/30	Charge: Holiday Fun	$	75

What is the amount owed?

Answer 1

Answer :

Transaction Date	Transaction	Balance	Number of days	Number of days * Balance
October 1	Balance	1178	2	2356
October 3	Credit 65	1113	9	10017
October 12	Charge : King Snooper	1275	3	3825
October 15	Credit 450	825	10	8250
October 25	Charge Delta	1160	6	6960
October 30	Charge Holiday Fun	1235	1	1235
			31	32643

Credit card companies charge interest on average daily Balance

Interest = Average Daily Balance * 9% * (1 / 12)

= (32643 / 31) * 9% * (1 / 12)

= 1053 * 9% * 1/12

= 7.8975 or 7.90

Amount Owed = 1235 + 7.90 = 1242.90