Question

On the April 8 billing date, Michelle had a balance due of $1459.73 on her credit card from April 8 through May 7. Michelle charged an additional $371.63 and made a payment of $700.

A. Find the finance charge on May 8, using the previous balance method assume that the interest rate is 1.6% per month.
B. Find the new balance on May 8.

Answer 1

The finance charge on Michelle's credit card using a 1.6% interest rate would be $23.36, and her new balance on May 8 after accounting for the finance charge, additional charges, and payment would be $1154.72.

Step-by-step explanation:

Calculating the Finance Charge and New Balance on a Credit Card

To calculate the finance charge using the previous balance method with an interest rate of 1.6% per month on Michelle's credit card, you would use the formula:

Finance Charge = Previous Balance × Monthly Interest Rate

For Michelle, this would be:

Finance Charge = $1459.73 × 0.016

Therefore, the finance charge would be:

Finance Charge = $23.36

To find the new balance on May 8, you would add the finance charge to the previous balance, then subtract any payments made and add any new charges:

New Balance = (Previous Balance + Finance Charge + New Charges) - Payments

New Balance = ($1459.73 + $23.36 + $371.63) - $700

So, the new balance would be:

New Balance = $1154.72