...good god. The final hurdle... is Credit Card Payments
Worked Example – Credit Card Payments
If you receive a credit card bill for £567 and the repayment conditions are:
• The minimum monthly repayment is 12% of the total bill
• The monthly interest rate is 3%
How much do you still owe at the end of three months?
Solution
For each month, you need to:
1. Calculate the monthly payment
2. Subtract the monthly payment from the bill.
3. Calculate the interest
4. Add the interest on
Month 1
1. Re-payment is 12% of the total bill i.e.
12% of £567 (12 ÷ 100) x 567 = £68.04
2. Bill is reduced to £567 - £68.04 = £498.96
3. Interest is 3% of £498.96 = (3 ÷ 100) x 498.96 = £14.97
4. The bill at the end of month 1 = £498.96 + £14.97 = £513.93
Month 2
1. Re-payment is 12% of the total bill i.e.
12% of £513.93 (12 ÷ 100) x 513.93 = £61.67
2. Bill is reduced to £513.93 - £61.67 = £452.26
3. Interest is 3% of £452.26 = (3 ÷ 100) x 452.26 = £13.57
4. The bill at the end of month 1 = £452.26 + £13.57 = £465.83
Month 3
1. Re-payment is 12% of the total bill i.e.
12% of £465.83 (12 ÷ 100) x 465.83 = £55.90
2. Bill is reduced to £465.83 - £55.90 = £409.93
3. Interest is 3% of £409.93 = (3 ÷ 100) x 409.93 = £12.30
4. The bill at the end of month 1 = £409.93 + £12.30 = £422.23
My brain melted again
LUCKILY, there's only two questions this time (thank god, numbers kill me ._.)
Question 1
You receive a credit card bill for £358. If the monthly rate of interest is 2%, how much will you still owe at the end of 4 months if you pay the minimum payment of £35 per month?
Question 2
A credit card bill totals £1260. If the minimum payment is 15% of the remaining bill, how long will it take to bring the bill down below £1000 if the monthly interest rate is 4%?
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