3.5 Credit Cards - B

Multiple Choice

Bellwork:

A company has 50 employees. Forty of them earn $100 per day, and 10 earn $60 per day. What is the average daily salary of the 50 employees?

• $92
• $85
• $105
• $75

Financial Algebra Second Edition

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3-5 Credit Cards

Learning Goal

The students will be able to:

• Define the basic vocabulary of credit cards.

• Compute an average daily balance.

Financial Algebra Second Edition

Slide 3

Example 2
Credit card companies issue a monthly statement, therefore APR (annual percentage rate) must be converted to a monthly periodic rate. If the APR is 21.6%, what is the monthly finance charge?

Financial Algebra Second Edition

Slide 4

To change to a monthly finance charge, divide the
APR by 12.

21.6 ÷ 12 = 1.8
Answer: 1.8%

Multiple Choice

Felix was given a card with an APR of 14%.

What was his monthly percentage rate?

• 2.5%
• 1.17%
• 1.5%
• 0.14%

Multiple Choice

If a monthly statement shows a monthly interest rate of 1.75 percent, what is the APR?

• 18%
• 2.5%
• 15%
• 21%

Financial Algebra Second Edition

Financial Algebra Second Edition

Slide 8

Example 3:
Rebecca did not pay last month’s credit card bill in full. Below is a list of Rebecca’s daily balances for her last billing cycle:

For 7 days she owed $456.11.

For 3 days she owed $1,177.60.

For 6 days she owed $990.08.

For 9 days she owed $2,115.15.

For 5 days she owed $2,309.13.

Find Rebecca’s average daily balance.

Financial Algebra Second Edition

Slide 8

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Multiple Choice

Vincent had these daily balances on his credit card for his last billing period.

9 days @ $778.12

8 days @ $1,876.00

4 days @ $2,112.50

10 days @ $1,544.31

What is the average daily balance? Round to the nearest cent.

• $1,234.56
• $1,480.78

• $1,777.99
• $1,689.23

Financial Algebra Second Edition

Slide 11

Example 4:
Rebecca (from Example 3) pays a finance charge on her average daily balance of $1,441.60. Her APR is 18%. What is her finance charge for this billing cycle?

Financial Algebra Second Edition

Slide 12

Solution
Finance charges are computed monthly, so the 18% APR must be divided by 12 to get a monthly percentage rate of 1.5%. Take 1.5% of the average daily balance to get the finance charge.
You can view this algebraically as a formula.

Substitute.

The finance charge is $21.62.

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Multiple Choice

Vincent had an average daily balance of $1,480.78 on his credit card for his last billing period. The APR is 19.2%.

What is the finance charge? Round to the nearest cent.

• $23.69

• $23.70

• $24.00

• $24.01

Drag and Drop

Felix and Oscar applied for the same credit card from the same bank. The bank checked both of their FICO scores. Felix had an excellent credit rating, and Oscar had a poor credit rating.

a) Felix was given a card with an APR of 14%. What was his monthly percentage rate? Round to the nearest hundredth of a percent.

Placeholder

b) Oscar was given a card with an APR of 21%. What was his monthly percentage rate? Round to the nearest hundredth of a percent.

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Placeholder

Drag these tiles and drop them in the correct blank above

1.17%

1.75%

1.25%

2.00%

1.50%

1.80%

Multiple Choice

Felix’s card has a monthly percentage rate of 1.17%, and Oscar’s card has a monthly percentage rate of 1.75%. If each of them has an average daily balance of $800 for a specific month, and has to pay a finance charge, how much more would Oscar pay than Felix?

• $3.50
• $1.20
• $4.64

• $4.75

Financial Algebra Second Edition

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ACTIVITY: FINE PRINT: Schumer Box

Schumer Box is a written summary of the most important terms and conditions of a specific credit card. Follow the directions on the worksheet to complete this activity.
Go to Quizzes on Canvas to do the lesson’s activity.

Financial Algebra Second Edition

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This activity will illustrate how even smaller purchases cost more when you purchase on a credit card and do not pay the balance in full each month. For this activity, we will use the credit card calculator from bankrate.com; open it in another window. We also make these assumptions:

● Your credit card’s interest rate (APR) is 19.9%.

● The minimum payment due each month is 3% of your starting balance.

Now, Go to Quizzes on Canvas to do the lesson’s activity:
CALCULATE: Shopping with Interest