On the January 25 billing date, Vivian had a balance due of $315.06 on her credit card. The transactions during the following month were: $\begin{array}{lll}
\text { January } 26 & \text { Charge : curtains } & \$ 331 \
\text { January } 27 & \text { Payment } & \$ 132.62 \
\text { February } 16 & \text { Charge: tires } & \$ 206.81
\end{array}$ The interest rate on the card is 1.1% per month. Using the average daily balance method, find the
Finance charge on February 25 (January has 31 days).

Question

Quizplus · Accepted Answer

To calculate the finance charge using the average daily balance method, follow these steps:1. Calculate the daily balance for each day of the billing cycle.   - From January 25 to January 25: $315.06 for 1 day   - From January 26 to January 26: $315.06 + $331 = $646.06 for 1 day   - From January 27 to February 15: $646.06 - $132.62 = $513.44 for 20 days   - From February 16 to February 24: $513.44 + $206.81 = $720.25 for 9 days2. Calculate the total of the daily balances.   - $315.06 * 1 = $315.06   - $646.06 * 1 = $646.06   - $513.44 * 20 = $10,268.80   - $720.25 * 9 = $6,482.253. Sum the totals to find the sum of the daily balances.   - $315.06 + $646.06 + $10,268.80 + $6,482.25 = $17,712.174. Divide the sum of the daily balances by the number of days in the billing cycle to find the average daily balance.   - January 25 to February 24 is 31 days.   - $17,712.17 / 31 = $571.365. Calculate the finance charge by applying the monthly interest rate to the average daily balance.   - 1.1% of $571.36 = $6.28Therefore, the finance charge on February 25 using the average daily balance method is $6.28.

On the January 25 Billing Date, Vivian Had a Balance