Question

Hannah has a credit card with an APR of 11.90% and a billing cycle of 30 days. The following table shows Hannah’s transactions in the month of April.

Date
Amount ($)
Transaction
4/1
322.95
Beginning balance
4/10
19.87
Purchase
4/14
50.00
Payment
4/19
71.21
Purchase

If Hannah’s credit card company calculates finance charges using the daily balance method, what will her April finance charge be?
a.
$2.71
b.
$3.20
c.
$3.30
d.
$3.61

Answer 1

Use the daily balance method: find each day's balance, sum them, then multiply by the daily rate (APR/365).

Balances by date range:
- Apr 1–9 (9 days): 322.95
- Apr 10–13 (4 days): 322.95 + 19.87 = 342.82
- Apr 14–18 (5 days): 342.82 − 50.00 = 292.82
- Apr 19–30 (12 days): 292.82 + 71.21 = 364.03

Sum of daily balances = 9(322.95) + 4(342.82) + 5(292.82) + 12(364.03) = 10,110.29

Daily rate = 0.119 / 365. Finance charge = 10,110.29 × (0.119/365) ≈ $3.30

Answer: c. $3.30