Find the average daily balance for the following credit card account. Assume one
ID: 2813013 • Letter: F
Question
Find the average daily balance for the following credit card account. Assume one month between billing dates. Find the finance charge if the annual interest rate is 22.32%. Find the new balance for the next month’s statement.
Date Activity Balance Compute
July 11 Balance from previous
statement $512.78
July 19 Returns $136.45
July 21 Boscov’s $135.73
July 27 Car rental $174.19
August 4 Payment $115.00
August 6 Gasoline $ 42.65
Average daily balance Finance charge New balance for
next billing period
Explanation / Answer
Calculation of average daily balance Period No.of days Balance outstanding A B C B x C July-11 to July-18 8 $512.78 $4,102.24 July-19 to July-20 2 $649.23 $1,298.46 July-21 to July-26 6 $784.96 $4,709.76 July-27 to Aug-3 8 $959.15 $7,673.20 Aug-4 to Aug-5 2 $844.15 $1,688.30 Aug-6 to Aug-10 5 $886.80 $4,434.00 Total $23,905.96 / No.of days in a month 31 Average Daily balance $771.16 Calculation fo finance charge Finance charge = [Average daily balance * APR * days in billing cycle] / 365 Finance charge = [$771.16 * 0.2232 * 31] / 365 = $14.62 Calculation of new balance for next billing period New credit card balance = Balance outstanding as on Aug-10 + Finance charge = $886.80 + $14.62 = $901.42
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