Rick carries a balance on his credit card each month. Today is the first day of the new, 28-day billing cycle. The current balance is $2,360 and the APR is 21%. Rick is buying a friend an expensive gift that costs $1,500 that he plans to put on his credit card. This will be his only purchase this month. How much in finance charges can he save by making the purchase on the last day of the billing cycle versus the first day of the billing cycle?

Question

What will be an ideal response?

Answer 1

1st day of cycle: (2,360 + 1,500) ´ (0.21 ÷ 12) = 67.55
last day of cycle: (2,360 ´ 27) + 3,860 = 67,580 ÷ 28 = 2,413.57
2,413.57 ´ (0.21 ÷ 12) = 42.24
67.55 42.24 = $25.31
He can save $25.31 by waiting to charge the $1,500 gift until the last day.