Katie had an unpaid balance of $1,734.50 on her credit card statement at the beginning of January. She made a payment of $165.00 during the month. If the interest rate on Katie's credit card was 7% per month on the unpaid balance, find the finance charge and the new balance on February 1.
To calculate the finance charge and the new balance on February 1, we need to break down the given information step by step.
Step 1: Calculate the finance charge for January.
The finance charge is the interest charged on the unpaid balance. Since the interest rate is 7% per month, we can calculate the finance charge using the formula:
Finance Charge = Unpaid Balance * Interest Rate
Finance Charge for January = $1,734.50 * (7% / 100) = $121.41
Step 2: Calculate the new balance on February 1.
To find the new balance, we need to add the finance charge for January to the unpaid balance at the beginning of January, and then subtract the payment made during the month.
New Balance on February 1 = Unpaid Balance + Finance Charge - Payment
New Balance on February 1 = $1,734.50 + $121.41 - $165.00
New Balance on February 1 = $1,690.91
So, the finance charge for January is $121.41 and the new balance on February 1 is $1,690.91.