Exploring the Unpaid Balance Method

The video tutorial explains how credit card finance charges are calculated using the unpaid balance method. It covers the concept of periodic rates derived from the annual percentage rate (APR) and demonstrates how to calculate the finance charge. The tutorial also guides viewers through the process of determining a new balance by considering purchases, payments, and credits. An example is provided to illustrate the calculation steps, emphasizing the importance of understanding credit card usage and its impact on balances.

What method is primarily discussed for calculating interest on credit cards in the video?

• Adjusted balance method

• Simple interest method

• Compound interest method

• Unpaid balance method

What is the periodic rate derived from?

• Monthly balance

• Annual percentage rate (APR)

• Quarterly earnings

• Daily transactions

How is the finance charge calculated using the periodic rate?

• Dividing the previous month's balance by the periodic rate

• Subtracting the periodic rate from the previous month's balance

• Adding the periodic rate to the previous month's balance

• Multiplying the periodic rate by the previous month's balance

What transactions are added to the previous month's balance to calculate the new balance?

• Service charges

• Only credits

• Purchases and cash advances

• Only payments

What is subtracted from the total to find the new balance?

• Previous month's balance

• Payments and credits

• Interest charges

• Annual fees

In the example, what was Ben's APR?

• 15%

• 12%

• 18%

• 20%

How much did Ben spend on gas over the month?

• $23.50

• $110.96

• $47.21

• $63.75

What was the finance charge calculated for Ben?

• $6.40

• $10.00

• $5.00

• $8.50

What was Ben's new balance at the end of the month?

• $526.78

• $426.78

• $400

• $326.78

What effect did Ben's transactions have on his credit card balance?

• Increased by $100

• Decreased by $6

• No change

• Decreased by $26.78