Using the average daily balance method and the information g

Using the average daily balance method and the information given, find the credit card average daily balance for the month of August (31 days). The annual interest rate is 18% July 31 Balance $380 August 55 Charge $45 August 1414 Payment $230 August 1515 Charge $164 August 2525 Charge $16

Solution

HEre as the initial balance on 1 Aug be $380 so total balance till 5 Aug remains the same (i.e. total 5 days). Then charge 45 will be added in this amount, so till 14 Aug, last amount remains 380+41= $421 ( for total 13 days)

and the payment $230 on Aug 14, will be subtracted from the amount till 13 Aug i.e. 421 - 230 = $191

Now as again there is a charge of $164 ,so total amount till Aug 25 is 191 + 164 =355 ( i.e. for total 11 days

and then last charge will also be added in it . So last amount now is $ 355 +16 = $ 371 (for total 6 days)

So total amount in this way = 380(5)+421(13)+ 355(11) + 371(6)

=1900 + 5473 + 3905 + 2226 = $13504

Now on dividing this amount by total 31 days, we get 13504/31 = $435.61

that is the required average daily balance.

Now monthly interest rate = 18%/12 = 0.015

So average montly interest 435.61 x 0.015 = $6.534

So monthly finance charges = $6.534

Answer