4 6 AVERAGE DAILY BALANCE OBJECTIVES Turn in

4 -6 AVERAGE DAILY BALANCE OBJECTIVES Turn in 4 -5 Worksheet Calculate the average daily balance using the credit calendar. Calculate the finance charge using the credit calendar. Slide 1

Key Terms ● average daily balance- The average amount owed per day during a billing cycle. ● credit calendar- A calendar method of finding the average daily balance. ● billing date- The date a credit card statement was written. Slide 2

How are the entries on the monthly statement calculated? Credit card users who do not pay their bills in full are charged a finance charge for the extra time. It is computed on the credit card statement if you have an unpaid balance on your card. Each card is different in its billing cycles and interest rates. Slide 3

Credit Calendar Step 1: Find the number of days in the billing cycle on the statement. On the calendar, shade boxes you don't need. Step 2: Enter the billing date in the last unshaded day of the calendar. Work backwards filling in the dates prior until the calendar is completely filled in. Note: the billing cycle includes some days from the previous month. Step 3: In one color, Look at the posted dates of each of the charges (debits). Put a plus (+) sign and the charged amount on the calendar dates that have debits posted. Next, look at the posted dates of the payments made. Put a minus sign (-) and the payment made on that calendar date. Slide 4

Credit Calendar Step 4: In a different color, Write the previous balance in the first box of your calendar, and continue writing the same amount in each box until the day before the first transaction. Step 5: What is the new balance for the day after a transaction has taken place? Record that amount down in each box until the next transaction. Step 6: Continue to record the daily balance in each box making the needed changes for each transaction. Step 7: Calculate the average daily balance. THINK: Dates, transactions, balances, calculate average Slide 5

Example 1 Use the information given in Elena Kaye’s credit card statement to verify the accuracy of her average daily balance. Slide 6

Example 1 b) Is there a better time during the billing cycle when Elena could have made her payment so that the average daily balance would have been less? c) Determine the finance charge for Elena’s billing cycle. d) When might Elena have made her purchases during the billing cycle in order to decrease her finance charge? Slide 7

Example 2 Use Mark Gilley’s Flashcard Statement to credit a credit calendar. There is an error in his bill. The average daily balance, finance charge, available credit, and new balance amounts are not filled in. Slide 8

Example 2 a) What is Mark’s average daily balance? b) What is Mark’s finance charge? c) What is Mark’s new balance? d) What is Mark’s available credit? e) If the $200 payment had been posted on 6/13, woulf Mark’s finance charge for this billing cycle have been higher or lower? Slide 9