Financial Algebra © Cengage/South-Western Slide 1 4-4 CREDIT CARDS Become familiar with the basic vocabulary of credit cards. Compute an average daily.

Financial Algebra© Cengage/South-Western Slide 11

4-4

CREDIT CARDS

Become familiar with the basic vocabulary of credit cards.

Compute an average daily balance.

OBJECTIVES

Financial Algebra© Cengage Learning/South-Western Slide 22

credit cardimpulse buying revolving charge

accountcharge cardTruth-in-Lending ActFair Credit Billing Act

Fair Debt Collection Practices Act

debit cardElectronic Funds

Transfer Actaverage daily balancemean

Key Terms

Financial Algebra© Cengage Learning/South-Western Slide 33

Example 1Example 1

Frank lost his credit card in a local mall. He notified his creditor before the card was used. However, later in the day, someone found the card and charged $700 worth of hockey equipment on it. How much is Frank responsible for paying?

Financial Algebra© Cengage Learning/South-Western Slide 44

Carrie’s credit card was stolen. She didn’t realize it for days, at which point she notified her creditor. During that time, someone charged $2,000. How much is Carrie responsible for paying?

CHECK YOUR UNDERSTANDING

Financial Algebra© Cengage Learning/South-Western Slide 55

Example 2Example 2

Credit card companies issue a monthly statement, therefore APR (annual percentage rate) must be converted to a monthly percentage rate. If the APR is 21.6%, what is the monthly interest rate?

Financial Algebra© Cengage Learning/South-Western Slide 66

If a monthly statement shows a monthly interest rate of x percent, express the APR algebraically.

CHECK YOUR UNDERSTANDING

Financial Algebra© Cengage Learning/South-Western Slide 77

EXAMPLE 3EXAMPLE 3

Rebecca did not pay last month’s credit card bill in full. Below is a list of Rebecca’s daily balances for her last billing cycle.

For seven days she owed $456.11. For three days she owed $1,177.60. For six days she owed $990.08. For nine days she owed $2,115.15. For five days show owed $2,309.13.

Find Rebecca’s average daily balance.

Financial Algebra© Cengage Learning/South-Western Slide 88

Last month, Paul had a daily balance of x dollars for 6 days, y dollars for 12 days, w dollars for q days, and d dollars for 2 days. Express the average daily balance algebraically.

CHECK YOUR UNDERSTANDING

Financial Algebra© Cengage Learning/South-Western Slide 99

EXAMPLE 4EXAMPLE 4

Rebecca (from Example 3) pays a finance charge on her average daily balance of $1,441.60. Her APR is 18%. What is her finance charge for this billing cycle?

Financial Algebra© Cengage Learning/South-Western Slide 1010

Steve owes a finance charge this month because he didn’t pay his bill in full last month. His average daily balance is d dollars and his APR is p percent. Express his finance charge algebraically.

CHECK YOUR UNDERSTANDING