Question

George charged a motorized bicycle on his credit card for $2,000 on June 12. His balance before that purchase on that credit card was $500. His credit card company calculates interest using the ADB including new purchases method. The APR on George’s credit card is 15% APR. Hint: the credit card rounded the monthly interest rate up to .013%.

George’s finance charge for this month was $22.97. Please show how to calculate this interest.

Answer 1

The calculation uses the accumulated daily balance method (ADB).
We assume the statement is based on calendar month (rare!).

George owes $500 from beginning to end of June, so 30 days out of 30.
Interest accrued is 500*0.013*30/30=$6.50.
He also owes $2000 from June 12 to June 30, so 19 days inclusively.
Interest accrued is $2000*.013*(19/30)=16.47
Total interest at the end of the month=$6.50+$16.47=$22.97