Calculating the Interest Applied to Credit Card Balances Credit cards are a great way to raise your credit score, but only when used wisely. Credit scores are raised by, among other things, paying your month bill on time (or early), and by paying your balances down quickly. This exercise will show you why paying more than the designated "minimum amount" is a good idea, not only for your credit score, but also to save you money. Your Task: Calculate the total interest charged over a 6-month period for a new credit card balance of $350 that on a credit card with an 19% APR. The calculation for the monthly interest on a credit card payment is: Daily Rate x Daily Balance x Days in the month* *For this exercise, assume 30.437 days per month (the average # of days for the 12 months) See example below. Example calculation for one-month interest amount using 23% APR on a $125 balance (23/365)(125/30.437)(30.437) = $7.88 IMPORTANT: Round decimal numbers ONLY at the final step to the nearest cent. Month 1: (no interest calculated on first month) Balance amount You pay the $35 minimum payment amount Month 2: Current balance (the result of paying $35 the previous month) Calculated interest (do math as indicated above) Current Balance + interest-New Balance You pay the $35 minimum payment amount (Subtract $35 from New Balance) Month 3: Current balance (the result of paying $35 the previous month) Calculated interest (do math as indicated above) Current Balance + interest=New Balance You pay the $35 minimum payment amount (Subtract $35 from New Balance) Continue this process for two (3) more months. See Page 2