Brian Hickey uses his credit card in August to purchase the following college supplies: books for $425, your long bus pass for $175, food service meal ticket for $450, and season tickets to the basketball games for $125,. On September 1, he uses 650 of his financial aid check to reduce the balance. The issuing bank charges 1.2% interest per month and requires full payment within 36 months. Brian had a previous balance is zero and he makes no other purchases with his card. What is the minimum payment due September 1, and what is the balance due on October 1?

Brian Hickey

a. Minimum due on September 1 is:

$510.90

b. Balance due on October 1 is:

$516.13

Explanation:

a) Data and Calculations:

Purchases in August:

Books =                    $425

Long bus pass =         175

Meal ticket =              450

Basketball games =   125

Total purchases = $1,175

Interest rate = 1.2% per month

Interest accrued         14.10

Total in debt       $1,160.90

September 1:

b) Debt reduction 650.00

Balance =            $510.90

Interest accrued       6.13

Ending Balance  $516.13

c) The credit card interest is calculated on the remaining debt after each transaction.  This interest is then added back to the debt to obtain the balance due.  If Brian Hickey does not carry out any other transaction with his credit card, the debt will continue to increase by 1.2% compounded monthly until the expiration of the 36-months period.