A credit card company determines a card​ holder's minimum monthly payment by adding all new interest to​ 1.5% of the outstanding principal. The credit card company charges an interest rate of ​0.05654% per day. On November ​17, a customer used his credit card to pay for the following business​ expenses: van repairs ​($600​), equipment maintenance ​($433​), office supplies ​($66​), and dinner with clients ​($173​). Use the given information and the rule that minimum payments are rounded up to the nearest dollar to answer parts a and b below.

Question

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Part 1
a. Assuming the card holder had no new​ interest, determine his minimum payment due on December​ 1, his billing date.
What is the card​ holder's minimum payment due on December 1

Answer 1

To calculate the card holder's minimum payment due on December 1, we need to first calculate the outstanding principal.

The card holder used his credit card to pay for van repairs ($600), equipment maintenance ($433), office supplies ($66), and dinner with clients ($173). So the total expenses were $600 + $433 + $66 + $173 = $1272.

Since the credit card company charges an interest rate of 0.05654% per day, we need to calculate the interest accrued from November 17 to December 1. This is 15 days.

Interest accrued = outstanding principal * interest rate * number of days
= $1272 * 0.05654% * 15
= $108.35

Now we can calculate the minimum payment due.

Minimum payment due = outstanding principal + interest accrued + 1.5% of the outstanding principal
= $1272 + $108.35 + 1.5% * $1272
= $1272 + $108.35 + $19.08
= $1399.43

Since minimum payments are rounded up to the nearest dollar, the card holder's minimum payment due on December 1 is $1400.