Hannah's finance charges using the daily balance method is $3.296
What is daily balance method?
Determine the daily periodic rate
Daily Periodic Rate = APR/365
Given an APR of 11.90%,
the daily periodic rate is
Daily Periodic Rate = 11.90/36500
Calculate the daily balances:
On 4/1, the balance is $322.95.
On 4/10, the balance is $322.95 + $19.87(purchase) = $342.82
On 4/14, a payment is made
$342.82 - $50.00 = 292.82.
On 4/19, purchase of $71.21
Balance = $292.82 + $71.21 = $364.03
Apply the daily periodic rate to each daily balance
On 4/1
Charges = 322.95 * 11.90/36500
= 0.105 * 9(days) = 0.945
On 4/10
Charges = 342.82 * 11.90/36500
= 0.112 * 4(days) = 0.448
0n 4/14
Charges = 292.82 * 11.90/36500
= 0.095 * 5(days) = 0.475
On 4/19
Charges = 364.03 * 11.90/36500
= 0.119 * 12(days) = 1.428
Sum of charges = 0.945 + 0.448 + 0.475 + 1.428
= $3.296
Hannah's finance charges using the daily balance method is $3.296
Complete question
Hannah has a credit card with an APR of 11.90% and a billing cycle of 30 days. The following table shows Hannah's transactions in the month of April.
Date
Amount ($)
Transaction
4/1
322.95
Beginning balance
4/10
19.87
Purchase
4/14
50.00
Payment
4/19
71.21
Purchase
If Hannah's credit card company calculates finance charges using the daily balance method, what will her April finance charge be?