Question

Use the average daily balance method to compute the finance charge on the credit card account for the month of August​ (31 days). The starting balance from the previous month is ​$220. The transactions on the account for the month are given in the table to the right. Assume an annual interest rate of 17​% on the account and that the billing date is August 1st.

The finance charge for the month of August is $___ . (Round to the nearest cent as needed.)

Date	Transaction
August 8	Made payment of ​$85
August 13	Charged ​$130 for hiking boots
August 19	Charged ​$25 for gasoline
August 28	Charged ​$30 for restaurant meal

Answer 1

finance charge = average daily balance * annual interest rate * (number of days in billing cycle / 365)

average daily balance = sum of balance on each day / number of days in billing cycle

number of days in billing cycle = 31

average daily balance = $7,695 / 31 = $248.23

finance charge = $248.23 * 17% * (31 / 365)

finance charge = $3.58

finance charge = $3.58