4-4 & 4-5: Credit Cards & Statements

Front

What does APR stand for in the context of credit cards?

Back

APR stands for Annual Percentage Rate, which is the yearly interest rate charged on borrowed money.

Front

How do you calculate the monthly percentage rate (MPR) from an APR?

Back

To calculate the MPR, divide the APR by 12. For example, if the APR is 19.2%, the MPR is 19.2% / 12 = 1.6%.

Front

If you have an average daily balance of $1 and an APR of 99.9%, what is the finance charge for one month?

Back

The finance charge is $0.08.

Front

What is the finance charge for an average daily balance of $2,220 with an APR of 8.7%?

Back

The finance charge is $16.10.

Front

What is the finance charge for an average daily balance of $3,254 with an APR of 15.6%?

Back

The finance charge is $42.30.

Front

What is the formula to calculate the finance charge based on average daily balance and APR?

Back

Finance Charge = (Average Daily Balance) x (MPR) x (Number of Days in Billing Cycle).

Front

What is the monthly percentage rate for an APR of 27%?

Back

The monthly percentage rate is 2.25%.

Front

If a credit card has an APR of 19.2%, what is the monthly percentage rate?

Back

The monthly percentage rate is 1.6%.

Front

What is the significance of understanding finance charges on credit cards?

Back

Understanding finance charges helps consumers manage their credit card debt and avoid excessive interest payments.

Front

What is the impact of a higher APR on finance charges?

Back

A higher APR results in higher finance charges, increasing the cost of borrowing.