On credit cards. this isn’t covered too well in your textbook so you’re i’m saying here in the video. it’s a very straightforward, easy section to pick topics that hopefully you’re finding are readily usable in sheet because i know i’m gonna buy a car i know i want to keep my head wrapped around a house payment. and in this case we’re going to talk about credit, having
Good credit specifically, in this particular section, we’re going to talk about and we’re going to show you how things on your credit statement are specific way that credit card companies calculate interest and that’s called the card computes this way or not is to whenever they send out these little small pieces of paper, not small pieces, they usually send out these
Was getting at, they’re written in the tiny print. if you actually take the you that they have used the average daily balance method. it is actually down here just below and just sort of show you ever so briefly the place it says your balance, you owe $1800 on this credit card. say, for example, you owe $1800 on that credit card. let’s say, to pay your interest on
How much you actually owe, a little over balance, which is like i just said, $1200, just for listed in the next print out that you see. if they use that average daily i = prt. so you have your average daily balance is your p your rate and want to keep it in years. so that’ll be on your formula. it’s on the to figure out what your new balance is you take your previous
Balance subtract interest. the reason why i have this print out here down below is because the credit card statements so that folks would know if you only make, so for example here, this person owes $1800 on the credit card but if they make only that minimum payment, they’re going to be paying on what they owe, over $3400, and really what’s even more put it in the freezer
And you don’t make another charge on it until you pay off that $1800. so if you continue to make charges it’s going you see that minimum payment there. if you ever can. definitely pay more than see, like i said, you almost paying another $1800 in interest. if you just double, notice in here, not even quite doubling it. the minimum payment, $36, well, a little over $36.
If take 3 years to pay it off and you would be paying a little over $2100 saving yourself a little over $1200 dollars which is quite putting that credit card aside and you are not putting anything else on it with out what this information here is telling you and like all of your credit card statements. so with that said, let’s turn it of course it’s a fictitious bank and
That sort of thing, but the numbers through is, i want us to go through and verify some of this information up here do it for yourself whenever you see this. this is a common form of what something looks you see out here on this statement would be the same terminology you’d see on another about keeping that streamlined. so with that said, i’m going to we can make sure that
This balance here they say that we owe and our finance previous balance on their card was $2250 and you won’t be able to able to verify that amount. previously this was the amount that payment last month of $50 and so that’s where you see down here in the debits of $300. so if you come down here and you take all if you take all of these values here and add them together,
You would find that interested in making sure, hey is this owe is that indeed correct? so that’s where we want to look at here in the middle. the finance charges and this would have to do with the fact that the interest rates associated with that see that they’ve already computed these values so if you were to add these two these two values are correct; that they are pick
Out a lot of things that are going on here. the number of days in the there are 29 days in this billing cycle. average daily balance, let me $2250 and that’s just coming back up to the top to the very tip top average daily balance you can see people choose to do transfer the amount that you can follow that all the way over it’s 15.99%. average daily balance shocking to you
That the cash advances she spent in purchases was $300 and that was coming back up and payment and you can see that either here in the activity or back up here at the top. so no fees were involved. so the finance charge is going as well so we’re going to need to figure out how much interest went to that as well so we’re adding two interests together. so let’s first do the
.1599 average days in the billing cycle was 29 over 365 times average this case it was higher because this person had a carryover balance but month then you don’t have to worry about any kind of interest at all, but straight across and you’re going to have $30.61. that activity part. you would do the same thing for the cash advance. so the cash advance amount of $205.24.
Multiply all of that through charge, that’s tracking. so now let’s take make sure that this your new balance is equal to your previous balance of 2250, i say subtract $300 charge, add in any interest , we just found that $34.20 concrete example. of course all this is sitting right here in front of real credit card statement how can you check and make sure that those are
Are obviously give you a credit card statement that’s already basically next page in n example 2 and 3. it says the balance of margaret’s credit following transactions in may. she made a credit to her account and then she made these charges. they’re telling us what 15.6 % and that’s not uncommon. credit cards have high interest rates. if a lot of the store cards, they
Have astronomical interest rates, 23, speaking on best buy, it’s other stores as well. so next billing date and it says use 31 days in your billing cycle since july apr so 15.6 % changing it to a decimal .156 do my number of days do that multiplication and you should find, oh her interest isn’t too bad, august 1st, her new balance is going to be her previous balance which
Can see that she made a $150 payment you’re going to add what i’d recommend, i probably should have said this from the top, take those 3 so then come down here just add in one number. so i’m adding got to add in my interest, of course you’ve got to pay interest, so do the addition and that’s really it for these problems. there’s nothing too what i did on the on the next
Page is i gave you 4 examples and then through with you, i’ll let my students work on example 3 on their own solo, we example 1, 2, 3 and 4 i’ll have the answers down here on the bottom so straightforward section. so i hope that you’ve enjoyed the class. i hope well as some of the other units as well. hopefully you have a lot of takeaway so much! good luck on your exam!
Transcribed from video
Video 4D credit cards By Deidre Wood