1 / 7

Chapter 4, Section 2

Chapter 4, Section 2. Credit Card Finance Charges. How are finance charges calculated?. They are calculated based on your APR and using a monthly or daily periodic rate .

taima
Download Presentation

Chapter 4, Section 2

An Image/Link below is provided (as is) to download presentation Download Policy: Content on the Website is provided to you AS IS for your information and personal use and may not be sold / licensed / shared on other websites without getting consent from its author. Content is provided to you AS IS for your information and personal use only. Download presentation by click this link. While downloading, if for some reason you are not able to download a presentation, the publisher may have deleted the file from their server. During download, if you can't get a presentation, the file might be deleted by the publisher.

E N D

Presentation Transcript

  1. Chapter 4, Section 2 Credit Card Finance Charges

  2. How are finance charges calculated? • They are calculated based on your APR and using a monthly or daily periodic rate. • To find the periodic rate, divide the APR by 12 or by 365 and round to the nearest ten-thousandth (4th spot after the decimal).

  3. Formula for Finance Charge • Balance subject to finance charge x periodic rate x number of periods • Example 1 • Check Your Understanding A & B

  4. How do credit cards figure the balance subject to finance charges? • The balance can be found by several methods—previous balance method, OR adjusted balance method.

  5. So how does the “previous balance method” work? • It charges interest on the balance in the account on the last billing date of the previous month. • Any payments, credits, or new purchases in the current month are NOT INCLUDED in the previous balance. • New balance= (finance charge + new purchases + fees) – (payments/credits) • Example 2 • Check your understanding C & D

  6. How does the “adjusted balance method”? • This method subtracts payments and credits during this month from the balance at the end of the previous month. • Purchases and fees made during the current month are not included in the adjusted balance. • Adjusted balance = previous balance – (payments + credits) • New Balance = adjusted balance + finance charge + new purchases + fees • Example 3 • Check your understanding E & F

  7. Let’s Practice! • P. 141-142, 5-16

More Related