Credit Cards

Front

What is a finance charge on a credit card?

Back

A finance charge is the cost of borrowing on a credit card, typically expressed as a percentage of the outstanding balance, which is added to the balance owed.

Front

How do you calculate the new balance after a finance charge is applied?

Back

To calculate the new balance, multiply the current balance by the finance charge rate (as a decimal), then add that amount to the current balance.

Front

If a credit card balance is $429.50 and the finance charge is 2.5%, what is the finance charge amount?

Back

The finance charge amount is $10.74, calculated as $429.50 * 0.025.

Front

What is the formula to find the new balance after a payment is made on a credit card?

Back

New Balance = Current Balance - Payment Amount.

Front

If a credit card balance is $3,169.78 and a payment of $825.80 is made, what is the new balance?

Back

The new balance is $2,343.98, calculated as $3,169.78 - $825.80.

Front

What does it mean to round to the nearest cent?

Back

Rounding to the nearest cent means adjusting a monetary amount to two decimal places, where amounts ending in .005 or higher are rounded up, and amounts below .005 are rounded down.

Front

How do you calculate a percentage of a dollar amount?

Back

To calculate a percentage of a dollar amount, multiply the dollar amount by the percentage (expressed as a decimal). For example, 2% of $4,586 is calculated as $4,586 * 0.02.

Front

If a finance charge is 5.5% on a balance of $1,429.50, what is the new balance?

Back

The new balance is $1,508.12, calculated as $1,429.50 + ($1,429.50 * 0.055).

Front

What is the significance of making payments on a credit card?

Back

Making payments on a credit card reduces the outstanding balance, which can lower future finance charges and help manage debt.

Front

What is the impact of high finance charges on credit card debt?

Back

High finance charges can significantly increase the total amount owed over time, making it more difficult to pay off the debt.