average daily balance . find the credit card finance charge for the month of august (31 days) the annual interest rate is 18%
July 31 balance $510
August 9 charge $86
August 10 payment $390
August 22 charge 147
August 27 charge $14
Using the average daily balance method and the information given, find the credit card finance charge for the month of August (31 days). The annual interest rate is 18%.
July 31 Balance $320
August 5 Charge $90
August 12 Payment $240
August 17 Charge $191
August 29 Charge $27
To calculate the finance charge for the month of August using the average daily balance method, you need to follow these steps:
Step 1: Calculate the average daily balance.
To find the average daily balance, you need to sum up the balances for each day and divide it by the number of days in the billing cycle.
July 31 balance: $510
August 9 charge: $86
August 10 payment: -$390 (negative sign indicates a payment made)
August 22 charge: $147
August 27 charge: $14
To calculate the average daily balance, perform the following calculations:
Total balance for each day:
July 31: $510
August 1: $510
August 2: $510
...
August 8: $510
August 9: $510 + $86 = $596
August 10: $596 - $390 = $206
August 11: $206
...
August 21: $206
August 22: $206 + $147 = $353
August 23: $353
...
August 26: $353
August 27: $353 + $14 = $367
August 28: $367
...
August 31: $367
Total balance = Sum of all daily balances = $510 + $510 + ... + $367
Number of days in the billing cycle = 31 days
Average daily balance = Total balance / Number of days
Calculate this value using the above equation.
Step 2: Calculate the finance charge.
Once you have obtained the average daily balance, you can calculate the finance charge using the following formula:
Finance charge = (Average Daily Balance x APR x Number of days in the billing cycle) / 365
In this case, the annual interest rate (APR) is 18%, which needs to be converted to a daily interest rate by dividing it by 365.
Plug in the values into the formula to calculate the finance charge.
I hope this explanation helps you in calculating the credit card finance charge for the month of August (31 days) based on the provided information.