Questions: Using the unpaid balance method, find the current month's finance charge on a credit card account having the following transactions: Last month's balance: 530 Last payment: 210 Annual Interest rate: 18% Purchases: 293 Returns: 561 The finance charge is (Round to the nearest cent)

Using the unpaid balance method, find the current month's finance charge on a credit card account having the following transactions: Last month's balance: 530 Last payment: 210 Annual Interest rate: 18% Purchases: 293 Returns: 561 The finance charge is (Round to the nearest cent)
Transcript text: Using the unpaid balance method, find the current month's finance charge on a credit card account having the following fransactio Last month's balance: $\$ 530$ Last payment: \$210 Annual Interest rate: 18\% Purchases: \$293 Returns: \$561 The finance charge is $\$$ $\square$ (Round to the nearest cent)
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Solution

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Solution Steps

Step 1: Calculate Unpaid Balance

The unpaid balance is calculated by subtracting the last payment from last month's balance: \[ \text{Unpaid Balance} = 530 - 210 = 320 \]

Step 2: Adjust Unpaid Balance

Next, we adjust the unpaid balance by adding purchases and subtracting returns: \[ \text{Adjusted Balance} = 320 + 293 - 561 = 52 \]

Step 3: Calculate Monthly Interest Rate

The monthly interest rate is derived from the annual interest rate: \[ \text{Monthly Interest Rate} = \frac{18\%}{12} = 0.015 \]

Step 4: Compute Finance Charge

Finally, the finance charge is calculated by applying the monthly interest rate to the adjusted balance: \[ \text{Finance Charge} = 52 \times 0.015 = 0.78 \]

Final Answer

The finance charge for the current month is \(\boxed{0.78}\).

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