in the previous balance method, the previous balance on the last billing date of the previous month is applied as the balance subject tofinance charges. so finance charges are calculated by multiplying the previous balance by the periodic rate and number of periods. the new balance is found by using the formula: previous balance plus finance charge plus
Average Credit Card Interest Rate, new purchases plus fees minus payments and credits. for example, mrs. winters' credit card uses the previous balance method, a daily periodic rate and an apr of 17.2%. in a 31-day billing cycle, there was a previous balance of $7,312, new purchases of $337.14 and credits of $447.
calculate the finance charge and new balance. the daily periodic rate is the apr dividedby 365, which is 17.2% divided by 365 or 0.000471. the finance charge is product of the previous balance, the daily periodic rate and the number of periods, or $7,312 times 0.000471 times31, which is $106.76, rounded to the nearest penny. the new balance is the previous balance plus finance charge plus new purchases plus fees minus payments and credits, which is $7,312 plus $106.76 plus $337.14 minus $447 or $7,308.90.
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