Question

Your credit card billing cycle is 10 days. You started your billing cycle with a balance of $500. On Day 4,

you made a $100 purchase. On Day 8, you made a $200 payment to your account. What is your finance
charge if your annual interest rate is 15%?

Answer 1

Answer: $0.16

Explanation:

To calculate the finance charge, we first need to determine the average daily balance for the billing cycle. We can do this by taking the sum of the balances each day and dividing by the number of days in the cycle:

(6 days x $500) + (3 days x $600) + (1 day x $400) = $3,800

10 days

The average daily balance for the billing cycle is $380.

Next, we need to calculate the daily interest rate by dividing the annual interest rate by 365 days:

15% ÷ 365 = 0.041%

To calculate the finance charge, we multiply the average daily balance by the daily interest rate and the number of days in the billing cycle:

$380 x 0.00041 x 10 = $0.16

Therefore, the finance charge is $0.16.