1) Credit cards charge interest on unpaid balances at annual percentage rates. Interest is calculated daily and added to the balance. 2) An example calculates the interest on an unpaid balance of $1724.29 at 19.5% for 17 days as $15.66 using the formula I=Prt. 3) Arnold used his credit card for various purchases totaling $1379.05 in November. With an 18.5% APR, the minimum payment of 5% or $10 (greater) is $68.95. If he only pays the minimum, his balance will be $1330.68 on the December statement.

1. Credit Cards
Slide 1
Definitions:
Credit: is a type of loan in which a borrower
receives something of value and agrees to
pay the lender for it later.
Finance Charge: the total amount of interest
paid to borrow a sum of money.
Cash Advance: a withdrawal of cash from an
ATM or bank teller charged to a credit card;
interest is usually calculated from the day of
the withdrawal.

2. Slide 2
Example 1:
Calculate the interest due on an unpaid balance of $1724.29 at a
rate of 19.50% for 17 days.
Formula: I = PrtClick to see the answer.
Answer:
The interest due is $15.66
I = (1724.29) x (0.195) x (17 ÷ 365)
I = 15.66
Interest is 19.50% per year
There are 365 days per year

3. Slide 3
Example 2:
Calculate the interest due on an unpaid balance of $2121.99 at a
rate of 18% for 16 months.
Formula: I = PrtClick to see the answer.
Answer:
The interest due is $509.28
I = (2121.99) x (0.18) x (16 ÷ 12)
I = 509.28
Interest is 18% per year
There are 12 months per year

4. Slide 4
Example 3:
Susan’s credit card company charges 24% per annum, counting
each day that an amount is owed. Her only purchase was an item
for $617.25. She did not pay on the due date, March 10. How
much will she owe on the next statement date, April 2, if she
doesn’t make any other purchases?
Calculate # of days that interest is chargedClick to see the answer.
Answer:
Susan will owe $626.18 on
the next statement date.
March 10 to March 31 = 22 days
April 1 to April 2 = 2 days
Total 24 days
Calculate Interest
I = Prt
Interest is 24% per year
There are 365 days per year
I = (617.25) x (0.24) x (22 ÷ 365)
I = 8.93
Total Due = 617.25 + 8.93 = 626.18

5. Slide 5
Example 4:
Arnold used his credit card to make the following purchases during the
month. He does not have to pay interest on purchases during the month,
only on outstanding balances. His credit card company charges 18.5%
per annum.
Add the total purchasesClick to see the answer.
Total = 104.32 + 201.54 + 65.42 + 154.21 +
72.24 + 781.32
Total = 1379.05
(0.05) x (1379.05) = 68.95
Minimum payment = $68.95 (since it is
greater than $10.00.
Date Item Amount
Nov 2 Groceries $104.32
Nov 7 Shoes $201.54
Nov 12 Dinner $65.42
Nov 16 Groceries $154.21
Nov 21 Gas $72.24
Nov 23 Plane Ticket $781.32
(a) What is her balance due on the statement
date, November 28?
(b) If the minimum payment is 5% or $10.00,
whichever is greater, what is Arnold’s minimum
payment?
5% of the balanceClick to see the answer.

6. Slide 6
Example 4 (continued)
(c) If he only pays the minimum and doesn’t use the card between then
and the next statement date, how much will he owe on his December 28
statement?
From the previous slide we know that the interest rate is 18.5%
We calculated that:
November charges = $1379.05 and the Minimum payment = $68.95
Calculate # of days that interest is chargedClick to see the answer.
Nov 28 to Nov 30 = 3 days
December 1 to December 28 = 28 days
Total 31 days
Calculate Interest
I = Prt
I = (1310.10) x (0.185) x (31 ÷ 365)
I = 20.58
Total Owing = 1310.10 + 20.58
= $1330.68
Calculate new amount owing
Balance = 1379.05 – 68.95 = 1310.10

7. Slide 7
Example 5:
Thomas is charged 17.90% per annum on his credit card balances. He used his card,
which had no previous balance, to make a purchase of $2201.90. He did not use the
card again before his statement dated April 29.
• On May 2, Thomas paid the minimum payment of 5%
• On May 6, Thomas took a cash advance of $96.25 on his credit card.
If he makes no other transactions, how much will he owe on his May 29 statement?
Calculate the minimum paymentClick to see the answer.
2201.90 x 0.05 = $110.10
Calculate unpaid balance as of May 2
I = (2091.80) x (0.179) x (30 ÷ 365)
I = 30.77 Total Amount Owing= 2091.80 + 30.77 + 1.13
= $2123.70
2201.90 – $110.10 = $2091.80
Interest Calculations:
• Calculate interest for unpaid balance
I = Prt
Calculate interest for unpaid balance
# of days =
1 day (April 30) + 29 days (May 1- 29)
= 30 days
• Calculate interest for cash advance
I = (96.25) x (0.179) x (24 ÷ 365)
I = 1.13
I = Prt
Calculate interest for cash advance
# of days = 24 days (May 6 – 29)