Finance Unit
1.10 Credit Cards
If I charged a total of $3500 in February on a credit card with a rate of 24% and paid a minimum payment of $105 per month (the first month is interest-free), how much would the principal amount owed be in 6 months (end of July)? What is the difference between the original amount that I charged and the amount of the principal 6 months later?
| Month that minimum payment is to be made |
Principal amount owed | 24% APR (Annual Percentage Rate) I=Prt |
Sum of principal + interest | Amount of monthly minimum payment | Total amount that is still owed after monthly payment is made |
|---|---|---|---|---|---|
| February | $3,500.00 | $0 (interest free period) | $3,500.00 | $105 | $3,395.00 |
| March | $3,395.00 | $67.90 | $3,462.90 | $105 | $3,357.90 |
| April | $3,357.90 | $67.16 |
$3,425.06 |
$105 | $3,320.06 |
| May | $3,320.06 |
$66.40 |
$3,386.46 |
$105 | $3,281.46 |
| June | $3,281.46 |
$65.63 |
$3,347.09 |
$105 | $3,242.09 |
| July | $3,242.09 |
$64.84 |
$3,306.93 |
$105 | $3,201.93 |
The difference between the original amount owed and the prinicipal six months later is $298.07.
You recently went on vacation and charged the entire trip on your credit card. Your balance before the trip was $0, but now it is $4995. Suppose the annual interest rate is 23.24% and the minimum payment is $146.85. Complete the table to determine your credit balance after 8 months. Remember that the first month is interest free.
| Month that minimum payment is to be made |
Principal amount owed | 23.24% APR (Annual Percentage Rate) I = Prt |
Sum of principal + interest |
Amount of monthly minimum payment |
Total amount that is still owed after monthly payment is made |
|---|---|---|---|---|---|
| July | $4,995.00 |
$0 |
$4,995.00 |
$146.85 |
$4,848.15 |
| August | $4,848.15 |
$93.89 |
$4,942.04 |
$146.85 |
$4,795.19 |
| September | $4,795.19 |
$92.87 |
$4,888.06 |
$146.85 |
$4,741.21 |
| October | $4,741.21 |
$91.82 |
$4,833.03 |
$146.85 |
$4,686.18 |
| November | $4,686.18 |
$90.76 |
$4,776.94 |
$146.85 |
$4,630.09 |
| December | $4,630.09 |
$89.67 |
$4,719.76 |
$146.85 |
$4,572.91 |
| January | $4,572.91 |
$88.56 |
$4,661.47 |
$146.85 |
$4,514.62 |
| February | $4,514.62 |
$87.43 |
$4,602.05 |
$146.85 |
$4,455.20 |