Question

Your bankcard has an APR of 18% and there is a 2% fee for cash advances. The bank starts charging interest on cash advances immediately. You get a cash advance of $600 on the first day of the month. You get your credit card bill at the end of the month. What is the total finance charge you will pay on this cash advance for the month

Answer 1

Answer: $21

Explanation: The Annual Percentage Rate is 18%, therefore the percentage rate for one month is:

0.18/12 = 0.015 = 1.5%

To get the total finance charge, we first calculate the monthly percentage on $600 thus:

600 X 0.015 = $9

Now we calculate the cash advance fee using 2% thus:

600 X 0.02 = $12

Total finance charge = $9 + $12 = $21.