Answer :
a. Based on the provided calculations, the finance charge is determined by multiplying the average daily balance, annual interest rate, and billing cycle duration, then dividing by 365. The new balance is the sum of the previous balance, finance charge, and the Petrela Sailboats charge, while available credit is the credit limit minus the new balance.
b. Analyzing the impact of the $30 Petrela Sailboats charge, if posted on 12/9, it would lead to a higher finance charge for the billing cycle, as the outstanding balance increases earlier, affecting the overall cost of credit.
c. To manage credit effectively, it is recommended to pay bills on time, monitor credit card balances regularly, keep credit utilization low, and avoid unnecessary charges. These practices contribute to maintaining a healthy credit profile and financial well-being.
Assuming that Ed's average daily balance is $2,000, and the finance charge is calculated at an annual interest rate of 18%, we can estimate the finance charge for the billing cycle and that the billing cycle duration is 30 days.
a. Calculations:
- Average Daily Balance = $2,000
- Annual Interest Rate = 18%
- Finance Charge = (Average Daily Balance * Annual Interest Rate * Billing Cycle Duration) / 365
- New Balance = Previous Balance + Finance Charge + Petrela Sailboats Charge
- Available Credit = Credit Limit - New Balance
b. Analyzing the impact of the Petrela Sailboats charge:
- If the $30 charge to Petrela Sailboats had been posted on 12/9, the finance charge would be higher for this billing cycle, as the outstanding balance increases earlier in the cycle.
c. Recommendations for managing credit effectively:
- Paying bills on time
- Monitoring credit card balances
- Keeping credit utilization low
- Avoiding unnecessary charges
The complete question is probably:
Ed Lubbock's FlashCard statement is below. There are entries missing. $ 1,000.00 Total Credit Line Total Available Credit Batance Day In Billing Cycle APR Perlod ic Rabe 30 19.8% 1.65%
a. What is Ed's average daily balance?
b. What is Ed's finance charge?
c. What is Ed's new balance?
d. What is Ed's available credit?
e. If the $30 charge to Petrela Sailboats had been posted on 12/9, would the finance charge be higher or lower for this billing cycle?
