Exploring Finance Charges with the Unpaid Balance Method

The video tutorial explains how to calculate finance charges on credit cards using the unpaid balance method. It covers the definition of finance charges, the periodic rate, and provides step-by-step examples for calculating unpaid balances and finance charges for different individuals. The tutorial emphasizes the importance of paying off credit card balances to avoid finance charges and ensures viewers understand the calculations involved.

What is a finance charge in the context of credit cards?

• A type of reward for timely payments

• A fee for exceeding the credit limit

• Interest charged on unpaid balances

• A charge for currency conversion

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What does the unpaid balance method calculate?

• Rewards earned through purchases

• Finance charge based on the portion of the balance unpaid

• Interest on the entire account balance

• Total credit limit

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CCSS.7.RP.A.3

What is the periodic rate as described in the video?

• The minimum payment required each month

• The interest rate applied to new purchases

• Annual interest rate divided by 12

• A fixed fee charged by the credit card company

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CCSS.7.RP.A.3

How do you find the unpaid balance according to the video?

• Add new purchases to the previous balance

• Subtract payments and credits from the previous balance

• Multiply the previous balance by the periodic rate

• Divide the previous balance by the number of days in the billing cycle

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In Lucille Sherman's example, what was her new balance?

• $92.40

• $173.34

• $79.55

• $100.00

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What is the first step in calculating the new balance on a credit card?

• Calculate the finance charge

• Add new purchases

• Apply any credits

• Find the unpaid balance

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What was Alejandra Martinez's finance charge?

• $4.23

• $3.50

• $5.00

• $2.75

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CCSS.7.RP.A.3

How much was Jesse's new balance after including his finance charge?

• $228.46

• $165.00

• $225.00

• $248.00

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Why is it important to avoid finance charges on your credit card?

• To earn rewards

• To extend the credit limit

• To minimize the amount owed

• To increase the credit score

What happens if the unpaid balance is zero?

• Interest rates decrease

• The credit limit increases

• Finance charges are applied

• No finance charges are incurred

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