Credits Cards and Consumer

MATH035
A credit card is a plastic card that

contains information and can be
used to make purchases.
There are two types of credit cards

– the bank cards and the travel and
entertainment cards.
Finance charge is the amount paid in
excess of the cash price; it is the cost to
the consumer for the use of the credit
card.
The due date on the bill is usually 1

month after the billing date.
The billing date is the month, date, and year

when a periodic or monthly statement is
generated.
Average daily balance is obtained by
dividing the sum of the total amounts
owed each day of the month by the
number of days in the billing period.
Average daily balance is obtained by
dividing the sum of the total amounts
owed each day of the month by the
number of days in the billing period.
Example: Suppose an unpaid bill of ₱4,000 has a due
date on October 15. After the due date, the
following transactions were made:
October 17 – Purchased groceries worth ₱ 1,500

October 20 – Paid ₱ 1,000
October 27 – Purchased 2 electric fans worth ₱ 3,000
The next billing date is November 15. The interest

on the average daily balance is 1.5% per month.
1)Prepare a table showing the unpaid
balance for each purchase, the number of
days the balance is owed, and the
product of these.
2)Find the finance charge on the

November 15 bill.
Prepare a table showing the unpaid balance for each
purchase, the number of days the balance is owed,
and the product of these.
• The Bangko Sentral ng Pilipinas
(BSP) has issued new rules
for credit card issuers that gives
customers more protection while
also opening up the market to
potential new players.
• The rules require all credit card
issuers to fully disclose, in an
understandable way, how it
computes finance charges and
other fees related to credit card
use, and to provide ample
notification to customers before
implementing any changes in the
charges.
• The rules also state that the
finance charges shall be
computed based on the unpaid
amount of the outstanding
balance as of statement cut-off
date, and shall not include
current and deferred charges.
•The central bank noted
that prohibitions against
unfair collection practices
have been strengthened
under the new rules.
• Since finance charges are the credit
card issuer's way of charging you for
carrying a balance, the simple way to
avoid finance charges is to not carry a
balance. Paying your credit card
balance in full every month will
prevent your credit card issuer from
adding a finance charge to your
account.
Source - https://www.thebalance.com/how-to-avoid-credit-card-finance-charges-960241
• Here's how it works. Your credit card has
a grace period, which is typically
between 21 and 25 days and listed on
the front or back of your billing
statement. The grace period is your
chance to pay your full balance and
dodge finance charges. Your statement
may even include a disclosure stating
the date by which your payment must
be received to avoid finance charges.
• Pay the full balance listed on your
credit card statement to avoid seeing a
finance charge on your next
statement. If you pay just part of your
balance, then your next billing
statement will have a finance charge
based on the unpaid balance and any
new purchases you make.
Try this!
Suppose an unpaid bill of ₱5,200 has a due
date on March 10 . After the due date, the
following transactions were made:
March 15 – Purchased groceries worth ₱ 2,000
March 19 – Paid ₱ 3,000
March 27 – Purchased 1 Samsung phone worth ₱
5,000
The next billing date is April 10. The interest on the
average daily balance is 1.5% per month. Find the
finance charge on the April 10 bill.
Annual Percentage Rate (APR) is the
effective annual interest rate on which credit
payments are based. The idea behind the APR is
that interest is owed only on the unpaid balance
of the loan.
Example: Beth purchased a 49-inch TV
originally priced at ₱ 31,000. She gave a ₱
5,000 down payment and agreed to pay the
balance in 6 equal monthly payments.
Determine the (a) finance charge and (b)
annual percentage rate if the finance
charge of the balance is 6% simple interest.
The payment for a loan based on APR is given by
where PMT is the payment, A is the loan amount, R

is the annual interest rate, N is the number of
payments per year, and T is the number of years.
EXAMPLE:
An appliance center is offering those
who will purchase refrigerators with an
annual interest rate of 10% for 30 months.
If Cherry purchases 1 refrigerator for ₱ 18,
000, find her monthly payment.
The payment for a loan based on APR is given by
where PMT is the payment, A is the loan payoff, R

is the annual interest rate, N is the number of
payments per year, and U is the number of
remaining (or unpaid) payments.
EXAMPLE:
Mark wants to pay off his loan for a
car that he has owned for 4 years. Mark’s
monthly payment is Php 11, 000 on a 5-
year loan at an annual percentage rate of
8%. Find the payoff amount.

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MATH035

A credit card is a plastic card that

There are two types of credit cards

The due date on the bill is usually 1

The billing date is the month, date, and year

October 17 – Purchased groceries worth ₱ 1,500

The next billing date is November 15. The interest

2)Find the finance charge on the

where PMT is the payment, A is the loan amount, R

where PMT is the payment, A is the loan payoff, R

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