Open End Installment Loans

• Credit Cards
• We work in terms of days here.
  • Interest is given as a daily rate : 0.04792%
• There is generally a grace period on purchases of 20-30 days
  • If you pay off the ENTIRE balance you are not charged interest.
  • But this does not apply to cash advances.
• Generally you must make a minimum monthly payment
  • This Varies by credit card, company, day, ...
  • This is the ENTIRE interest for the month.
  • Plus any fees or penalties
  • Plus at least a portion of the interest
    • 1% of the balance
    • Or $20, which ever is higher
  • This is often rounded up to the next dollar
• A credit card company determines a card holder's minimum monthly payment by adding all new interest to 1.5% of the outstanding principal. The card has an interest rate of 0.05429% daily. The card is used to purchase $1,440 worth of goods and services in a month. Assume no previous balance. Assume the month has 30 days.

  Find the minimum payment due for the next billing cycle

  i = 0, no interest for the first month.
  1.5% of p = 1440× .015 = 21.6
   $22
     

  If a payment of $300 is made, find the minimum payment for the following billing cycle, assume no additional charges were made. Assume the month has 30 days.

  New P = 1440-300 = 1140
  i = prt 
    = 1140 × 0.0005429 × 30 
    = 18.57
  1.5% of p = 1140 × .015 = 17.1
  
  Payment 18.57+17.1 = 35.67 
     = 36
     

• For other problems, you may have to find the number of days in a month.

     
      30 days hath September,
      April, June and November,
      All the rest have 31,
      Excepting February alone
      (And that has 28 days clear,
       With 29 in each leap year).