Question

The ending balance on Scotty's credit card last month was $853.00. He only paid $45.00, so a finance charge of $11.00 was added to his account. Both his payment and the fee were posted on September 10 . His billing period is September 10− October 9. On September 20, he charged $50.00. On September 27, he charged $78.00. His interest rate is 29%. Calculate his average daily balance for the period. How much will his finance charge be?

Answer 1

Scotty's average daily balance for the billing period is $270.00. His finance charge will be $0.22.

Step-by-step explanation:

To calculate Scotty's average daily balance, we need to consider the balances on each day during the billing period. Let's break it down step by step:

1. Starting balance: $853.00
2. Payment made on Sep 10: -$45.00
3. Finance charge added on Sep 10: +$11.00
4. Charge on Sep 20: +$50.00
5. Charge on Sep 27: +$78.00

To calculate the average daily balance, we need to consider the number of days for each balance. Let's assume there are 30 days in the billing period:

1. Starting balance: $853.00 × (30 - 20) = $853.00
2. Payment made on Sep 10: $0.00 × (20 - 10) = $0.00
3. Finance charge added on Sep 10: $11.00 × (20 - 10) = $11.00
4. Charge on Sep 20: $50.00 × (20 - 10) = $500.00
5. Charge on Sep 27: $78.00 × (20 - 27) = -$552.00

Now we can calculate the average daily balance:

Average daily balance = (853.00 + 0.00 + 11.00 + 500.00 - 552.00) / 30 = $270.00

Next, let's calculate the finance charge. The interest rate is 29%, so we multiply the average daily balance by the interest rate and divide it by 365 (number of days in a year):

Finance charge = $270.00 × (29 / 100) / 365 = $0.216

Therefore, Scotty's average daily balance for the period is $270.00 and his finance charge will be $0.22.