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: ​$650    Last​ payment: ​$220    Annual Interest​ rate: 21​%   ​ Purchases:  ​$594   ​ Returns: ​$698

Answer 1

Ans:- In the Unpaid balance method we first start with the Previous month balance, then we calculate Interest on that figure and add to that amount. Then we add any additional purchases made in that particular month and after that, we subtract any credits or payment made to that account. Then we will take the Interest of that amount to get the finance charge.

  

Previous Month Balance	$650
Add: Interest	11.38 ( 650*0.21 / 12)
Total amount	$661.38
Add: Purchases	$594
Less: last payment and returns	$220 + $698
Total amount	$661.38 + $594 - $220 - $698 =$337.38
Finance charge	$337.38 * 0.21 /12 = $5.90

Therefore the Finance using the Unpaid balance method will be $5.90

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