10. Finance charges on credit cards Finance Charges on Credit Cards Even before you use a new credit card, what information is the institution that issued your card required by law to disclose? O The rate of interest and estimated dollar amount of finance charges O The method used to compute finance charges and estimated dollar amount of finance charges O The rate of interest and method used to compute finance charges In general, how does the interest rate on cash advances compare to the rate on purchases? It is lower rage daily balance (ADB) method. You The most common method that banks and retail credit card issuers use to compute finance charg expect to actively use your card. Which variation of the ADB method will be least expensive for yo higher O ADB excluding new purchases the same O ADB including new purchases It doesn't matter Consider the following case: On November 1st, Christian's credit card has a balance of $5,626.25. According to the terms of the card's lending agreement, an interest rate of 18% per year is assessed and the monthly finance charges are calculated using the Average Daily Balance (ADB) including purchases method. During the month, Christian expects to make the purchases listed below and will make a payment of $421.97 on November 25th, and has collected the following additional information: Date Purchases November 5 $1,835.95 November 15 55.60 November 1963.10 November 27 447.77 Additional Information Monthly interest rate 1.50% Beginning card balance $5,626.25 Days in the month 30 Use the following table to help Christian estimate his monthly interest charge for November. Number of Days Daily Balance Calculated Value Dates 11/ - 11/ 11/ - 11/ 11/ - 11/ 11/ - 11/ 11/ - 111 11/ - 12/ Total Average Daily Balance With Purchases Finance Charge One way by which Christian can increase his finance charges, everything else remaining constant, is to: O Make larger or more frequent payments O Buy a larger number of more expensive items using your card O Make fewer, less expensive purchases 10. Finance charges on credit cards Finance Charges on Credit Cards Even before you use a new credit card, what information is the institution that issued your card required by law to disclose? O The rate of interest and estimated dollar amount of finance charges O The method used to compute finance charges and estimated dollar amount of finance charges O The rate of interest and method used to compute finance charges In general, how does the interest rate on cash advances compare to the rate on purchases? It is lower rage daily balance (ADB) method. You The most common method that banks and retail credit card issuers use to compute finance charg expect to actively use your card. Which variation of the ADB method will be least expensive for yo higher O ADB excluding new purchases the same O ADB including new purchases It doesn't matter Consider the following case: On November 1st, Christian's credit card has a balance of $5,626.25. According to the terms of the card's lending agreement, an interest rate of 18% per year is assessed and the monthly finance charges are calculated using the Average Daily Balance (ADB) including purchases method. During the month, Christian expects to make the purchases listed below and will make a payment of $421.97 on November 25th, and has collected the following additional information: Date Purchases November 5 $1,835.95 November 15 55.60 November 1963.10 November 27 447.77 Additional Information Monthly interest rate 1.50% Beginning card balance $5,626.25 Days in the month 30 Use the following table to help Christian estimate his monthly interest charge for November. Number of Days Daily Balance Calculated Value Dates 11/ - 11/ 11/ - 11/ 11/ - 11/ 11/ - 11/ 11/ - 111 11/ - 12/ Total Average Daily Balance With Purchases Finance Charge One way by which Christian can increase his finance charges, everything else remaining constant, is to: O Make larger or more frequent payments O Buy a larger number of more expensive items using your card O Make fewer, less expensive purchases
