Credit cards

• Credit cards are an example of an open ended installment loan.
• Generally you work with daily or monthly interest.
• You sometimes don't have to pay interest the first month of a charge.
• You are expected to pay 1/36 rounded up each month, or $10 which ever is larger
• Problem 26, page 632

     Total Purchases = 425+175+450+125= 1175
     The first month 1175/36  = 32.63 = 33
  
     He pays 650
     So he owes  1175-650 = 525
     His interest for the next month is  
        i = prt
        i = 525*.012 * 1 = 6.30
        His new balance is 531.30
     

• We just used the unpaid balance method where i interest is charged on the unpaid balance from the previous period.
• The average daily balance method requires us to compute the average daily balance on the account.
• Number 32, page 633

  
   April 15   57.88     57.88    1 day     57.88
   April 16   64.75    122.63    4 days   490.52
   April 20  -45.00     77.63   13 days  1009.19
   May    3   72.85    150.85    7 days  1055.95
   May   10   135.50   286.35    5 days  1431.75
                                30 days  4045.62
  
  			      4045.62/30 = 134.85
  
         134.85*.0135 = 1.82
  
         Total Charge  = 286.35+1.82