Calculate the monthly finance charge for the following credit card transaction. Assume that it takes 10 days for a payment to be received and recorded and that the month is 30 days long. (Round your answer to the nearest cent.)
$500 balance, 20% rate, $50 payment, previous balance method
I need help you can even give different numbers if you would like to. I just need to know the Examples
To calculate the monthly finance charge using the previous balance method, we need to consider the average daily balance and the monthly interest rate.
1. Calculate the average daily balance:
- Start with the previous balance: $500
- Subtract any payments made during the billing cycle: $500 - $50 = $450
- Determine the number of days in the billing cycle: 30 days
- Calculate the average daily balance: $450 * 30 = $13,500
2. Calculate the monthly interest rate:
- Convert the annual interest rate to a monthly rate: 20% / 12 months = 1.67%
3. Calculate the monthly finance charge:
- Multiply the average daily balance by the monthly interest rate: $13,500 * 1.67% = $225.45
- Round the finance charge to the nearest cent: $225.45 ≈ $225.46
Therefore, the monthly finance charge for a $500 balance with a 20% rate and a $50 payment (using the previous balance method) is approximately $225.46.