February 28, 2017
7.2 Finance Charge: Unpaid-Balance Method
1. Determining the Finance Charge:
credit card company or a ______________________
A ________________________
charge account may use the unpaid balance method to
finance charges
compute _________________
_______________.
the portion of previous balance
2. The unpaid balance method uses ____________________________________________
________________________________________________________________________
you have not paid
3. The formula is: Unpaid Balance = ______________ - (_________ + _________)
periodic rate
unpaid balance
Finance Charge = _____________________×_________________________
New Balance = ___________________+____________________+________________
unpaid balance finance charge new purchases
EXAMPLE 1: Use the figure below. Lucille Sherman’s charge account statement shows a previous balance
of $132.40, a payment of $40.00, and a purchase of an item for $79.55. The monthly finance charge is
computed at 1.5% of the unpaid balance. Determine (a) unpaid balance, (b) finance charge, and (c) new
balance.
a. _________________ b.__________________ c.___________________
**Work 5-7**
February 28, 2017
7.2 Finance Charge: Unpaid-Balance Method
8) EXAMPLE: Roy Nelson’s charge account uses the unpaid-balance method to compute the finance
charge at a monthly periodic rate of 1.75%. During the month, he charged $159.89, made a $200.00
payment, and had a 9.90 finance charge. Find his (a) unpaid balance, (b) previous balance, and (c) new
balance.
STEP 1: Let a = Roy Nelson’s unpaid balance
Finance charge = unpaid balance × periodic rate
Roy’s unpaid Balance = _____________________________________
STEP 2: Let b = Roy’s previous balance
Unpaid Balance = previous balance – (payments + credits)
Roy’s previous balance = ____________________________________
STEP 3: New Balance = unpaid balance + finance charge + New Purchases
New Balance: ______________________________________________
**WORK #9**