Credit Card Billing Methods
Credit Card Billing Methods
NAME: _____________________________________ DATE: ________ HOUR: _____
Directions: Calculate each of the following situations using each of the three billing methods.
1. You purchased an item for $600 with a credit card that has a 18% APR. You pay $300 on the 15th of the month. What will the finance charge and the end of month balance be for each of the billing methods?
| |Adjusted Balance Method |Previous Balance Method |Average Daily Balance Method |
|Finance Charge | | | |
|Ending Balance | | | |
2. You purchased an item for $1000 with a credit card that has a 20% APR. You pay $400 on the 15th of the month. What will the finance charge and the end of month balance be for each of the billing methods?
| |Adjusted Balance Method |Previous Balance Method |Average Daily Balance Method |
|Finance Charge | | | |
|Ending Balance | | | |
3. You purchased an item for $1500 with a credit card that has a 14% APR. You pay $700 on the 15th of the month. What will the finance charge and the end of month balance be for each of the billing methods?
| |Adjusted Balance Method |Previous Balance Method |Average Daily Balance Method |
|Finance Charge | | | |
|Ending Balance | | | |
4. You purchased an item for $300 with a credit card that has a 24% APR. You pay $200 on the 15th of the month. What will the finance charge and the end of month balance be for each of the billing methods?
| |Adjusted Balance Method |Previous Balance Method |Average Daily Balance Method |
|Finance Charge | | | |
|Ending Balance | | | |
QUESTIONS:
1. Which method charges the most in finance charges?
2. Why would most credit card companies want to use the Average Daily Balance Method?
3. Dave’s take home pay is 83% of his gross pay. If his annual gross salary is $43,220, what is his annual salary after taxes? What is his monthly salary after taxes? And what is his maximum borrowing limit for the year and month using the 20/10 rule?
4. Dale’s take home pay is 92% of his gross pay. If his annual gross salary is $2,000 and he bought an IPOD with payments of $14.00 a month. What is his maximum borrowing limit for the year and month using the 20/10 rule? Does he have a safe credit load?
5. The Creamer’s bought an IPOD. The cash price was $200. They paid $10 down and borrowed $190, which they will repay in payments of $5 per month for the next 45 months. What are their finance charges and APR?
6. The Warner’s bought golf clubs. The cash price was $1000. They paid $125 down and borrowed $875, which they will repay in payments of $45 per month for the next 20 months. What are their finance charges and APR?
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