Phil had an unpaid balance of $1,854.50 on his credit card statement at the beginning of December. He made a payment of $45.00 during the month. If the interest rate on Phil's credit card was 2.5% per month on the unpaid balance, find the finance charge and the new balance on January 1
To find the finance charge and the new balance on January 1, we need to consider the interest applied to the unpaid balance and the payment made during the month.
1. Calculate the finance charge:
- Convert the interest rate from a percentage to a decimal: 2.5% = 0.025.
- Multiply the unpaid balance by the interest rate to find the finance charge:
Finance charge = $1,854.50 * 0.025 = $46.36.
2. Calculate the new balance:
- Subtract the payment made during the month from the total balance, including the finance charge:
New balance = ($1,854.50 + $46.36) - $45.00
= $1,900.86 - $45.00
= $1,855.86.
Therefore, the finance charge is $46.36, and the new balance on January 1 is $1,855.86.