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? a. $2. 71 b. $3. 20 c. $3. 30 d. $3. 61.

Answer 1

The finance charge of April month of Hannah's credit card which is calculated by daily balance method is $3.30.

What is finance charge?

The finance charge is the amount of the money which borrowed, including the interest amount and other fees.

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

Average balance in the account,

$A=(322.95\times10)+[(342.87)\times4]+(292.82\times5)+(364.03\times11)\\A=10069.41$

Hannah has a credit card with an APR of 11. 90% and a billing cycle of 30 days. The finance charges,

$\rm FC=\dfrac{10069.41\times11.9}{365\times100}\\FC\approx3.30$

Hannah’s credit card company calculates finance charges using the daily balance method,

The finance charge of April month of Hannah's credit card which is calculated by daily balance method is $3.30.

Learn more about finance charges here;

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