1 point
James carries a balance on his credit card each month. Today is the first
day of the new, 30-day billing cycle. The current balance is $x and the APR
is 30%. James is buying his father a gift that costs $1,500 that he plans to
put on his credit card. This will be his only purchase this month, and he will
be making this purchase on the first day of the billing cycle. If his finance
charge will be $60, what is the current balance on his credit card *

A credit card balance is the amount of the charges made on a credit card, including the finance charges, and therefore, owed to a credit card company.

Data and Calculations:

Current current balance = $x

APR (Annual Percentage Rate) of interest = 30%

Monthly APR = 2.5% (30%/12)

Current purchase for the month = $1,500

Finance charge for the month = $60

Finance charge for the current purchase = $37.50 ($1,500 x 2.5%)

Finance charge for the current balance = $22.50 ($60 - $37.50)

The current balance that attracts the finance charge of $22.50 will be $900 ($22.50/2.5%).

Alternatively:

Since the monthly APR is 2.5% and the finance charge is $60 for the month, the balance at the end of the month is $2,400 ($60/2.5%).

Thus, the current balance on James' credit card is $900 ($2,400 - $1,500) while the end-of-the-month balance is $2,460 ($900 + $1,500 + $60).

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