Barbara opened a store credit card to purchase a game console for $396. She put the entire purchase on the credit card. Her APR is 24.99% and the minimum payment is 5%. Assuming she makes only minimum payments, what is the remaining balance on her card after 3 months?

Question

anonymous · Answer

If APR is 24.99%, this means that the monthly rate is 24.99/12 = 2.0825%.

T0 - Time of Purchase - Principal amount is $396
T1 - 1 month after purchase - Amount owing is 396*1.020825 = $404.25
        5% of that sum is $20.21
        Remaining balance is 404.25-20.21 = $384.04
T2 - 2 months after purchase - Amount owing is 384.04*1.020825 = $392.04
        5% of that sum is $19.60
        Remaining balance after 2 months is 392.04-19.60 = $372.44
T3 - 3 months after purchase - Amount owing is 372.44*1.020825 = $380.20
        5% of that sum is $19.01
        Remaining balance after 3 months is 380.20 - 19.01 = $361.19

There are easier way of doing this through formulas, however its important to understand where the answer comes from rather then just sticking in the numbers into a formula.

anonymous · Answer

Sherri uses her credit card to pay for new transmission that ended up totaling $1,050.25. She can pay off up to $400 a month. The card has an annual rate of 18.5%. How much will she pay in interest?