4.2.2 Flashcardizz: Credit Cards: Determining New Balance

Front

What is a Credit Card New Balance?

Back

The New Balance on a credit card is the total amount owed at a given time, including the previous balance, finance charges, new purchases, and any payments or credits applied.

Front

How do you calculate the New Balance on a credit card?

Back

New Balance = Previous Balance + Finance Charge + New Purchases - Payments & Credits.

Front

What is a Previous Balance?

Back

The Previous Balance is the amount owed on the credit card at the end of the last billing cycle before any new transactions.

Front

What is a Finance Charge?

Back

A Finance Charge is the cost of borrowing on a credit card, typically expressed as a percentage of the outstanding balance.

Front

What are New Purchases in the context of credit cards?

Back

New Purchases refer to any new transactions made on the credit card during the current billing cycle.

Front

What are Payments & Credits?

Back

Payments & Credits are amounts paid towards the credit card balance or credits applied to the account, reducing the total amount owed.

Front

If the Previous Balance is $1,000, Finance Charge is $50, New Purchases are $200, and Payments & Credits are $100, what is the New Balance?

Back

New Balance = $1,000 + $50 + $200 - $100 = $1,150.

Front

What happens if you do not pay the full New Balance?

Back

If you do not pay the full New Balance, you will incur additional finance charges on the remaining balance in the next billing cycle.

Front

Why is it important to track your New Balance?

Back

Tracking your New Balance helps you manage your spending, avoid overspending, and prevent accumulating debt.

Front

What is the impact of making only minimum payments on a credit card?

Back

Making only minimum payments can lead to higher interest costs over time and prolong the repayment period.