Question

You owe $190 on your credit card. Your average daily balance is $96, the billing cycle is 30 days, and the interest rate on the credit card is 18%. What is your interest charge?

Answer 1

To find the interest charge on a credit card, convert the annual interest rate to a daily rate, multiply by the average daily balance, and then by the number of days in the billing cycle. For an average daily balance of $96 and an 18% annual rate over 30 days, the interest charge is approximately $1.42.

Step-by-step explanation:

To calculate the interest charge on a credit card with an average daily balance of $96, a billing cycle of 30 days, and an annual interest rate of 18%, you can follow these steps:

1. First, convert the annual interest rate to a daily rate by dividing by 365 (the number of days in a year). The daily rate for an 18% annual interest rate is 0.18/365 = 0.000493151, or roughly 0.0493% per day.
2. Multiply the daily rate by the average daily balance to get the daily interest charge. For an average daily balance of $96, the daily interest is $96 × 0.000493151 = $0.0474233.
3. Finally, multiply the daily interest charge by the number of days in the billing cycle to find the total interest for the period. With a 30-day billing cycle, the interest charge is $0.0474233 × 30 = $1.4227.

Therefore, the interest charge on the credit card for this billing cycle would be approximately $1.42.