1. Business and Consumer Loans
Chapter 12

2. Section 12.1
Open Ended Credit and Charge Cards

3. Open-Ended credit: No fixed payments
Customer continues making payments until no outstanding balance remains
Additional credit is often extended before initial amount is paid off

4. The Unpaid Balance Method
Used to calculate finance charges based on the unpaid balance at the end of the previous month.

5. The unpaid balance on a Visa card was $284. 37
The unpaid balance on a Visa card was $ During the month, a payment of $200 was made and charges of $ were added. If the finance charge is 1.2% per month on the unpaid balance, find (a) the finance charge for the month and (b) the new balance at the end of the month.

6. The Average Daily Balance Method
First, the balance owed on the account is found at the end of each day.
All these amounts are averaged.
This average is used to find the finance charge.

7. The July 5 balance on a credit card was $494
The July 5 balance on a credit card was $494. A payment of $400 was made on July 22, and a charge of $ was made on July 25. If the finance charge is based on 1½%, find (a) the average daily balance (b) the finance charge for the month, and (c) the balance on August 5.

8. P 469: “Gaining control of your finances”
A family refinanced the mortgage on their home, reducing the payment from $ to $ They also sold a car that had a monthly payment of $ and negotiated a $50-per-month reduction on their second car. Find the decrease in monthly payments.