Question

Find one of your credit card agreements, or your parent’s, or your friend’s, or go online and find one from a bank. (This information typically does NOT appear on your monthly credit card monthly bill) Note the following: 1. Name of credit card and issuing bank 2. Nominal annual interest rate, stated as “APR” (Annual Percentage Rate) for on-time payments 3. Maximum APR if payments are late, or credit limit exceeded, or bad check sent, or … 4. Stated compounding period (likely daily) – you may have to hunt for this, it’s likely buried later in the fine print CALCULATE: • Effective annual interest rate at nominal APR (from #2, above) • Effective annual interest rate at highest APR shown in the agreement (from #3, above) Note: Many APR’s are now being stated as some percentage plus the “Prime Rate.” The current Prime Rate is 4.5%

Answer 1

Answer:-

Please Note:- Below details are then from American Express Website. The card details are from “card” section of website. Fee details are from “Rates and Fees” Link.

1. Name of Credit Card:- Blue Cash Everyday Card Issuing Bank:- American Express
2. Nominal Annual Interest Rate or APR:- 0% for first 15 months and later 16.24% to 25.24%. This will vary withmarket based on the Prime Rate.
3. Maximum APR for late payment, bad check, etc.- 29.99%
4. Stated Compounding Period:- It is mentioned as using a method “average daily balance including new purchase, hence it is daily.

Calculation:-

Effective Annual interest rate at nominal APR post deducting the Prime Rate of 4.5% is 11.74% (=16.24 - 4.5) to 20.74 (=25.24 - 4.5).