Question

Using the average daily balance method and the information? given, find the credit card finance charge for the month of August? (31 days). The annual interest rate is? 18%.

July 31 Balance ?$200

August 8 Charge ?$96

August 16 Payment ?$80

August 17 Charge ?$179

August 23 Charge ?$49

The finance charge is ?$

Answer 1

The average daily balance is a common accounting method where credit card interest charges are calculated using the total amount due on a card at the end of each day.

1. The balance on the card from 1^st August to 7^th August is $ 200. Also,7*$ 200 = $ 1400.

2. The balance on the card from 8^th August to 15^th August is $ 296. Also, 8*$ 296= $ 2368.

3. The balance on the card on 16^th August to 7^th August is $ 216.Also, 1*$296 = $ 296.

4. The balance on the card from 17^th August to 22^nd August is $ 395. Also, 6* $395 = $ 2370.

5. The balance on the card from 23^rd   August to 31^st August is $ 444. Also, 9*$ 444 = 3996.

The average daily balance is $ (1440+2368+216+2370+3996)/31 = $ 10390/31. Thus, the credit card finance charge for the month of August is ($ 10390/31) * 31*(18) % *(1/365)= $ 5.12 ( on rounding off to the nearest cent).

The finance charge is $ 5.12