Question

You have a credit card with an APR of 12%. You begin with a balance of $300, in response to which you make a payment of $75. The first month you make charges amounting to $65. You make a payment of $75 to reduce the new balance, and the second month you charge $75. Complete the following table. (Round your answers to the nearest cent.)

	Previous balance	Payments	Purchases	Finance charge	New balance
Month 1	$300.00	$	$	$	$
Month 2	$	$	$	$	$

Answer 1

The credit card carries an APR of 12% i.e. 1 % per month. At the end of 1^st month , the unpaid balance , excluding the finance charge is 300+65-75 = $ 290 so that the finance charge is 1% of $ 290 = $ 2.90. Thus, at the end of 1^st month , the unpaid balance , including the finance charge is $ 290+$2.90 = $ 292.90.

At the end of 1^st month , the unpaid balance , excluding the finance charge is $ 292.90+$ 75 = $ 367.90 so that the finance charge is 1% of $ 367.90 = $ 3.68. Thus, at the end of 1^st month , the unpaid balance , including the finance charge is $ 367.90 +$ 3.68 = 371.58.

	Previous balance($)	Payments($)	Purchases($)	Finance Charge($)	New Balance ($)
Month 1	300.00	75.00	65.00	2.90	292.90
Month 2	292.90		75.00	3.68	371.58