Cassandra’s credit card billing cycle is 12 days. She started her billing cycle with a balance of $300. On Day 4, she made a $50 purchase. On Day 8, she made a $250 payment to her account. What is her finance charge if her annual interest rate is 18%?
To calculate Cassandra's finance charge, we need to first determine her average daily balance (ADB) for the billing cycle. We can do this by multiplying the balance for each day by the number of days that balance was held, adding them together, and dividing by the number of days in the billing cycle:
(8 days x $300) + (4 days x $350) = $2,800
12 days
Average daily balance = $2,800 ÷ 12 = $233.33
Next, we need to calculate the daily interest rate by dividing the annual interest rate by 365:
18% ÷ 365 = 0.0493%
Finally, we can calculate the finance charge by multiplying the ADB by the daily interest rate and the number of days in the billing cycle:
$233.33 x 0.0493% x 12 = $1.44
Therefore, Cassandra's finance charge is $1.44.