Question

The previous statement for your credit card had a balance of $530. You make purchases of $160 and make a payment of $60. The credit card has an APR of 23%. What is the finance charge for this month? (Round your answer to the nearest cent.)

$

Answer 1

finance charge = amount outstanding this month * APR / 12   

(We divide by 12 because APR is the rate for the year, or 12 months, whereas we are calculating interest for 1 month).

amount outstanding this month = amount outstanding previous month + purchases - payment

amount outstanding this month = $530 + $160 - $60

amount outstanding this month = $630

finance charge = amount outstanding this month * APR / 12   

finance charge = $630 * 23% / 12   

finance charge = $12.08