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Credit Card - unpaid balance method











































Nick has a revolving department store credit card account with an annual percentage rate of 15%.

Last month’s balance on the account was $423.78.

During the current month, he made purchases totaling $123.42 and made a payment of $100.

The store uses the unpaid balance method.

According to this information, what must be the amount of the finance charge? Round your answer to the nearest cent.

I can’t seem to find a way to do an unpaid balance method for this question and finance charge. HELP ME PLEASE!

Comments for Credit Card - unpaid balance method

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Jul 29, 2013
Finance Charge
by: Staff


Answer


Part I



The unpaid-balance method of computing finance charges uses the unpaid balance from the prior period to compute the interest charge.

Because of this, the finance charges for the current period are not affected by any new charges or payments.

You can compute the Current Period unpaid-balance as follows:

Current Period Unpaid Balance = Prior Period Unpaid Balance + new purchases - payments + finance charges



 Credit Card Balance - finance charges computed using the unpaid balance method






for your problem:

Prior Period Unpaid Balance = $423.78

new purchases = $123.42

payments = $100

finance charges = Prior Period Unpaid Balance x monthly percentage interest rate

annual percentage interest rate = 15%
monthly percentage interest rate = 15% / 12 = 1.25%

finance charges = ($423.78) x (0.0125) = $5.29725, or $5.30

Current Period Unpaid Balance = 423.78 + 123.42 - 100 + 5.30 = $452.50



Jul 29, 2013
Finance Charge
by: Staff

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Part II


Credit Card - prior period unpaid balance, new purchases, payments, and finance charges




Credit Card - calculation of the current period balance using the unpaid balance method







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Jul 29, 2013
Finance Charge
by: Staff


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Part III


the final answer is:

finance charge: $5.30

final unpaid balance: $452.50


Credit Card - finance charge and unpaid balance








Thanks for writing.

Staff
www.solving-math-problems.com


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