. Jason’s credit card’s beginning unpaid balance for August is $2,000. During the August billing cycle he made a payment of $200 and used card to purchase $50 worth of grocery. Credit card charges 24% annual percentage rate and uses the unpaid balance method.
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To calculate Jason's credit card balance for the month of August, we need to take into account his beginning unpaid balance, any payments made, and any additional charges. The credit card charges a 24% annual percentage rate (APR) and uses the unpaid balance method.
1. Beginning Unpaid Balance: Jason's credit card's beginning unpaid balance for August is $2,000.
2. Payment Made: Jason made a payment of $200 towards his credit card balance.
3. Additional Charges: Jason used his credit card to purchase $50 worth of groceries.
To calculate the interest on the unpaid balance, follow these steps:
4. Calculate the daily periodic rate (DPR): Divide the APR by the number of days in a year. In this case, divide 24 by 365 to get the daily periodic rate.
DPR = 24% / 365 = 0.0657% per day (approximately)
5. Calculate the average daily balance (ADB): Subtract the payment made from the beginning unpaid balance, and then add any additional charges. Divide this amount by the number of days in the billing cycle. Assuming a 30-day billing cycle, the calculation would be:
ADB = (Beginning Unpaid Balance - Payment Made + Additional Charges) / Number of Days in the Billing Cycle
ADB = ($2,000 - $200 + $50) / 30 = $1,850 / 30 = $61.67 per day (approximately)
6. Calculate the interest on the average daily balance: Multiply the average daily balance by the daily periodic rate. Continuing from the previous step:
Interest = ADB * DPR
Interest = $61.67 * 0.0657% = $0.0405 (approximately)
7. Calculate the new balance: Add the interest to the average daily balance and subtract any payments made during the billing cycle. Continuing from the previous steps:
New Balance = ADB + Interest - Payment Made
New Balance = $61.67 + $0.0405 - $200 = -$138.29 (approximately)
The new balance is -$138.29, which means Jason currently has a credit balance of $138.29.
Note: If the interest calculation turns out to be a negative value, it means Jason's payment and charges have already covered the interest for the month, resulting in a credit balance.