Question

Andrew is on a 30-day billing cycle. His credit card has an APR of 16.60% and computes finance charges using the previous balance method. The table below shows transactions that Andrew made in March. Based on the information in the table, what will Andrew’s March finance charge be?

Date
Amount ($)
Transaction
3/1
1,794.30
Beginning balance
3/6
440.15
Purchase
3/9
35.65
Purchase
3/22
250.00
Payment
3/25
51.71
Purchase
a.
$46.07
b.
$28.66
c.
$21.36
d.
$24.82

Answer 1

Using the previous-balance method the finance charge is based on the beginning balance only.

Monthly rate = 16.60% / 12 = 0.0138333...
Finance charge = $1,794.30 × 0.0138333... ≈ $24.82

Answer: d. $24.82