If I have a $1000 charge on a credit card charging 1% interest using the adjusted balance method, minimum payment due is $40. How much will you save in interest charges in june by paying $80 instead?
To calculate the interest charges saved in June by paying $80 instead of the minimum payment of $40, you need to follow these steps:
Step 1: Determine the adjusted balance. The adjusted balance method considers the remaining balance after subtracting the previous month's payments. In this case, the remaining balance from the previous month is $1000.
Adjusted balance = Previous balance - Previous month's payments
Adjusted balance = $1000 - $40
Adjusted balance = $960
Step 2: Calculate the finance charge on the adjusted balance. The finance charge is the interest charged on the outstanding balance. For this credit card, the interest rate is 1% per month.
Finance charge = Adjusted balance * Monthly interest rate
Finance charge = $960 * (1% / 100)
Finance charge = $9.60
Step 3: Calculate the interest charges saved. Comparing the scenario where you pay $80 instead of the minimum payment of $40, you can find the interest charges saved.
Interest charges saved = Finance charge (minimum payment) - Finance charge (actual payment)
For the minimum payment:
Finance charge (minimum payment) = $960 * (1% / 100)
Finance charge (minimum payment) = $9.60
For the actual payment:
Finance charge (actual payment) = $880 * (1% / 100)
Finance charge (actual payment) = $8.80
Interest charges saved = $9.60 - $8.80
Interest charges saved = $0.80
Therefore, by paying $80 instead of the minimum payment, you would save $0.80 in interest charges in June.