Question

Abby has a credit card which uses the adjusted balance method to compute finance charges. Her card has an APR of 11.83%, and she is on a 30-day billing cycle. The table below shows her transactions in the month of January.

Date
Amount ($)
Transaction
1/1
722.10
Beginning balance
1/6
18.12
Purchase
1/7
65.00
Payment
1/14
18.00
Purchase
1/20
44.79
Purchase
1/23
34.25
Purchase
1/27
40.00
Payment

What will Abby’s January finance charge be?
a.
$6.08
b.
$7.12
c.
$7.22
d.
$8.25

Answer 1

Adjusted balance = beginning balance − payments = 722.10 − (65.00 + 40.00) = 617.10.

Monthly periodic rate = APR/12 = 11.83%/12 = 0.1183/12 = 0.00985833.

Finance charge = 617.10 × 0.00985833 ≈ 6.0836 → $6.08.

Answer: a. $6.08