You had a $1,800 balance last month after your payment on your credit card. You charged...

You had a $1,800 balance last month after your payment on your credit card. You charged one pair of shoes on the 10^th for $180. Your card has a minimum finance charge fee of $5 per month and an APR of 12%. What is your total balance due this period if the card’s fees are calculated via the adjusted balance method?

Total balance due

Solutions

Expert Solution

Solution:
	The balance due $1,998

Working Notes:
	Adjusted balance method
	The total balance due
	= Balance of beginning - any payments + monthly interest or finance charge + any purchases made during the month


Notes:	Purchases made during the month is not considered for interest calculation as it is eligible for grace period for payments of till the billing cycle date .


	minimum finance charge fee of $5 per month
	Monthly interest = Beginning balance x APR /12 = 1800 x 12%/12 = 18
	Since monthly interest payment is more than $5 per month the minimum finance charge hence the balance will increase by monthly interest not by minimum monthly finance charge.


	Adjusted balance method
	The total balance due
	= Balance of beginning - any payments + monthly interest or finance charge + any purchases made during the month

	=1800 + 18 + 180
	=$1,998

Please feel free to ask if anything about above solution in comment section of the question.

jeff jeffy answered 1 month ago

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