Question

The credit card statement of Gloria Herrera for January listed these items: 1/1, previous balance, $89.27; 1/5, purchase, $159.34; 1/9, purchase, $108.45; 1/24, payment, $150; and 1/28, fee, $25. The card company uses the average daily balance method including new purchases and a daily periodic rate of 0.000575. What is Gloria's finance charge for January and what is her new balance?​

Answer 1

To calculate Gloria Herrera's finance charge for January, find the average daily balance and multiply by the daily periodic rate. Gloria's new balance is the previous balance plus new purchases minus payments and fees.

Step-by-step explanation:

To calculate Gloria Herrera's finance charge for January, we need to find the average daily balance for the month and multiply it by the daily periodic rate. The average daily balance is calculated by finding the sum of the daily balances and dividing it by the number of days in the billing cycle.

Step 1: Calculate the daily balances by subtracting any payments made from the previous balance and adding new purchases. For example, on 1/5, the daily balance is $89.27 - $150 + $159.34 = $98.61.

Step 2: Find the average daily balance by summing the daily balances and dividing by the number of days in the billing cycle. In this case, the billing cycle is 28 days. Average daily balance = ($89.27 + $98.61 + $98.61 + ... + $98.61) / 28 = $94.43.

Step 3: Calculate the finance charge by multiplying the average daily balance by the daily periodic rate. Finance charge = $94.43 * 0.000575 = $0.0543.

Gloria's new balance is the previous balance plus new purchases minus payments and fees. New balance = $89.27 + $159.34 + $108.45 - $150 - $25 = $182.06.