11.3 Credit Cards
The following are some of the things you would expect to see in credit card statement:
- Opening balance: balance unpaid at the start of the period.
- Closing balance: balance unpaid at the end of period.
- Minimum payment due: Minimum amount you need to pay by due date.
- Interest free period: No. of days credit can be availed without any interest charged calculated from day 1 of statement period.
- Cash advance: Transactions within interest-free period do not get charged interest, however, that does not apply to any cash taken out which is charged interest.
- Interest rate: rate of interest charged if outstanding balance is not paid by due date. This interest rate is usually compounded daily.
Consider the following credit card statement for August.
Minimum payment: $15 or 2.5%
Interest free days: 55 days
Annual interest charged after interest-free days: 22%
- What is the due date?
- What is the closing balance on 30 Aug?
- What is the minimum payment due on due date?
- If only minimum payment is made on due date and there are no further transactions, what is the balance at 30 Sep?