Question

An unpaid credit card bill for $654.95 had a due date of May 8. Purchases of $395 were made on May 15, $118.78 on May 17, and $69.67 was charged on June 2. A payment of $360 was made on May 25. Find the finance charge due on June 8 if the interest rate on the average daily balance is 1.4%. (See Example 2 in this section.)

Answer 1

The finance charge due on June 8 is approximately $52.38.

Step-by-step explanation:

To find the finance charge due on June 8, we need to calculate the average daily balance from May 8 to June 8 and then apply the interest rate of 1.4%. First, let's find the average daily balance:

1. From May 8 to May 25, the balance is $654.95
2. From May 26 to June 8, the balance is ($654.95 - $360) + ($395 - $360) + ($118.78 - $360) + ($69.67 - $360)

Now, let's calculate the average daily balance:

Average daily balance = ((17 x $654.95) + (14 x (($654.95 - $360) + ($395 - $360) + ($118.78 - $360) + ($69.67 - $360)))) / 31

Average daily balance = ($11120.15 + $856.72) / 31

Average daily balance = $115976.67 / 31

Average daily balance ≈ $3741.79

Next, we can calculate the finance charge using the average daily balance and the interest rate of 1.4%:

Finance charge = $3741.79 x (1.4% / 100)

Finance charge ≈ $52.38