Charge Accounts & Credit Cards Practice for Test

Front

What is a finance charge?

Back

A finance charge is interest that a company charges to a credit account for not paying the total amount owed by the due date.

Front

How do you calculate a finance charge?

Back

To calculate a finance charge, multiply the outstanding balance by the periodic interest rate.

Front

If Jenna's finance charge is computed at 2% of $3,250, what is its dollar amount?

Back

$65.00

Front

What is a charge account?

Back

A charge account is an existing line of credit at the business that issued it.

Front

What is the periodic rate in finance charges?

Back

The periodic rate is the interest rate applied to the balance for a specific period, often expressed as a percentage.

Front

How do you find the new balance after a payment and a new purchase?

Back

New Balance = Previous Balance - Payment + New Purchase.

Front

If Lisa's previous balance was $430.25, she made a payment of $180.00, and a new purchase of $120.75, what is her new balance?

Back

$374.75

Front

What is the average daily balance?

Back

The average daily balance is calculated by dividing the sum of daily balances over a period by the number of days in that period.

Front

If the sum of the daily balances of a savings account totals $24,750.00 over 30 days, what is the average daily balance?

Back

$825.00

Front

What is the formula for calculating the average daily balance?

Back

Average Daily Balance = Total of Daily Balances / Number of Days.