Final answer:
To calculate the monthly finance charge using the average daily balance method, find the average daily balance and multiply it by the monthly interest rate. In this case, the monthly finance charge is $7.58.
Step-by-step explanation:
To calculate the monthly finance charge using the average daily balance method, you need to find the average daily balance and multiply it by the monthly interest rate. Here's how:
1. Calculate the average daily balance by adding up the daily balances for each day in the billing cycle and dividing by the number of days.
2. Multiply the average daily balance by the monthly interest rate to get the finance charge.
Using the given information:
- Balance = $800
- APR = 17%
- Payment = $750
- Days in billing cycle = 30
- Days payment takes to be received = 10
1. Calculate the average daily balance:
Average daily balance = (Balance x Number of days) / Days in billing cycle
Average daily balance = ($800 x 20 days) / 30 days
Average daily balance = $533.33
2. Calculate the finance charge:
Finance charge = Average daily balance x Monthly interest rate
Monthly interest rate = APR / 12
Monthly interest rate = 17 / 12 = 1.4167%
Finance charge = $533.33 x 1.4167% = $7.58
Therefore, the monthly finance charge for the credit card transaction is $7.58 (rounded to the nearest cent).