Question

Adam’s credit card calculates finance charges using the adjusted balance method and a 30-day billing cycle. The table below shows his use of that credit card over three months.

Date
Amount ($)
Transaction
4/1
626.45
Beginning balance
4/10
37.41
Purchase
4/12
44.50
Purchase
5/3
65.50
Payment
5/16
24.89
Purchase
5/20
104.77
Payment
6/6
23.60
Payment
6/10
15.00
Purchase
6/14
51.85
Purchase

If Adam’s credit card has an APR of 14.63%, what is Adam’s balance at the end of June?
a.
$629.42
b.
$629.66
c.
$627.27
d.
$628.40

Answer 1

Adjusted-balance method: finance charge = monthly rate × (beginning balance − payments during cycle). Purchases are added after computing the finance charge.

Monthly rate = 14.63%/12 = 0.0121916667.

April cycle (4/1–4/30)
- Beg bal = 626.45; no payments in April → adjusted bal = 626.45
- Finance charge = 626.45 × 0.0121916667 ≈ 7.64
- Purchases = 37.41 + 44.50 = 81.91
- End-Apr bal = 626.45 − 0 + 81.91 + 7.64 = 716.00

May cycle (5/1–5/30)
- Beg bal = 716.00; payments in May = 65.50 + 104.77 = 170.27 → adjusted bal = 716.00 − 170.27 = 545.73
- Finance charge = 545.73 × 0.0121916667 ≈ 6.65
- Purchases = 24.89
- End-May bal = 545.73 + 24.89 + 6.65 = 577.27

June cycle (6/1–6/30)
- Beg bal = 577.27; payments in June = 23.60 → adjusted bal = 577.27 − 23.60 = 553.67
- Finance charge = 553.67 × 0.0121916667 ≈ 6.75
- Purchases = 15.00 + 51.85 = 66.85
- End‑June bal = 553.67 + 66.85 + 6.75 = 627.27

Answer: c. $627.27