Scribd
Upload
74 views

ADB Example

This document provides a step-by-step solution to calculating finance charges and the balance owed on a credit card statement. It calculates daily balances for purchases and a cash advance, averages the daily balances, applies interest rates to determine finance charges, and sums the charges and balance.

Uploaded by

alexapodadera4
Copyright
© © All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
Available Formats
Download as DOCX, PDF, TXT or read online on Scribd
74 views

ADB Example

This document provides a step-by-step solution to calculating finance charges and the balance owed on a credit card statement. It calculates daily balances for purchases and a cash advance, averages the daily balances, applies interest rates to determine finance charges, and sums the charges and balance.

Uploaded by

alexapodadera4
Copyright
© © All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
Available Formats
Download as DOCX, PDF, TXT or read online on Scribd
You are on page 1/ 2

Name: Luigyn D.

Mariamonte

Example: Ana made a Php 5000 purchase on May 7, a Php 10,700 purchase on May 19, and cash
advance of Php 20,000 on May 21 using her credit card, which previously had zero balance. Her monthly
statements are billed on the 31st of each month. The interest on the average daily balance is 4.5% per
month and for cash advances is 3%. Find the finance charge and the balance owed on May 31 bill.

Solution:
To determine the finance charge, we need to prepare a table indicating the unpaid balance for each
purchase, the number of days the balance is owed, and the product of these amounts.

Step 1: Calculate the Daily Balances

DATES PAYMENTS/PURCHASES UNPAID NO. OF DAILY


BALANCE DAYS BALANCE
May 7 – 18 5000.00 5000.00 12 60,000.00
May 19 - 20 10,700.00 15, 700.00 2 31,400.00
May 21 – 31 20,000.00 35, 700.00 11 392,700,00
TOTAL 484, 100.00

The amount owned on May 31 is the beginning unpaid balanced less any returns or payments plus
new charges and the finance charges.
The sum of the total amounts owed by Ana each day of the month is Php 484,100.00 and the total
number of days from May 1 to May 31 is 31 days.
Step 2: Compute the Average Daily Balances.

Average Daily Balance=


∑ of tℎe Amounts Owed Eacℎ Day of tℎe Montℎ
Number of Days∈tℎe Billing Period
484. 100
Average Daily Balance=
31
Average Daily Balance=15 , 616.12
Step 3: Find the Total Finance Charge.
We first compute for the finance charge and cash advance fee, then solve for the total finance
charge.
Finance Cℎarge = ADB × Periodic Rate
Finance Cℎarge =15,616.12× 0.45
Finance Charge =7,027.25
Casℎ Advance Fee= Amount of Casℎ Advance × Rate
Casℎ Advance Fee=20 , 000 × 0.03
Cash Advance Fee=600. .00
Total Finance Cℎarge=Regular Finance Cℎarge + Casℎ Advances Fee
Total Finance Cℎarge=7 ,027.25+ 600
Total Finance Charge=7,627.25
Step 4: Determine the Current Balance.
Current Balance =Previous Balance − Payments+ New Cℎarges + Finance Cℎarge
Current Balance =0 −0+35,700+ 7,027.25
Current Balance =42,727.25
The total finance charge is Php 7, 027.25 and the current balance is Php 42, 727.25

You might also like