Question

True False Question ,please explain it 3 sentence

Average daily balance (ADB) is a way to calculate interest for credit card. The interest of loan is calculated by multiplying the daily interest rate with average amount owed at the end of each day.

Answer 1

The Statement is True

Adjusted daily balance is a method to calculate the interest on credit card. In this method, we compute the average amount owed at the end of each day, which can be done by computing total amount owed and dividing by the number of days in a period.

To compute the interest amount chrgeable on credit card, we multiply the interest rate per period and Average amount owed, The interest rate can be chargeable per monthly or daily.

For Example: He has a balance of $1000 due from Jan 1 to Jan 15 and then he made purcahase of $200 on Jan 16.

So, Total Balance = ( 1000 * 15 + (1000 + 200) * 16)

= $34200

Number of days in january = 31

So, Average Balance owed each day = 34000 / 31

= $1103
If interest rate is 2% per month

Then Interest rate payment = 1103 * 2%

= $22.06