Question

Rick carries a balance on his credit card each month. Today is the first day of the new, 28-day billing cycle. The current balance is $2,360 and the APR is 21%. Rick is buying a friend an expensive gift that costs $1,500 that he plans to put on his credit card. This will be his only purchase this month. How much in finance charges can he save by making the purchase on the last day of the billing cycle versus the first day of the billing cycle?

Answer 1

Answer:

$ 25.31 finance charges  he can save by making the purchase on the last day of the billing cycle versus the first day of the billing cycle

Step-by-step explanation:

In the beginning of Month ,  ADB will be on the total amount of balance and the purchase that means ADB = 0.21 (2360 + 1500)/12

= $ 67.55

ADB at the end of the month  

Part of 2360 for 27 days = (2360 x 27)/28 = $ 2275.71

Part of 3860 for 1 day = (3860 x 1)/28 = $ 137.85

So the total becomes $ 2275.71 + $ 137.85 = $ 2413.56

So , ADB will be $ 2413.56 x (0.21)/12

= $ 42.23  

Difference in the finance charges at the beginning and at the end of the month is  

$ 67.55 - $ 42.23

= $ 25.31