Algebra with Applications Posts 6

Algebra with Applications Posts 6

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In financial management, the calculation of credit card interest is critical to organizations and creditors. Credit card interest is the standard way of generating revenue by credit card issuers, whether banks or credit unions. The issuer provides a customer with an account number or a card for making payments or borrowing money from banks. This aspect makes it necessary for people to keep track of their credits by calculating credit interests. Three main methods of calculating credit interest include Previous Balance Method, Adjusted Balance Method, and Average Daily Balance Method (ADB) (ASAP Credit Card, 2012). The Previous Balance Method involves charges 0.04931 per cent of the previous balance and multiplies the result with the sum of days in a billing cycle. In the Adjusted Balance Method, a creditor would be charged 0.04931 per cent of the adjusted balance. The adjusted balance is calculated as a difference between the previous balance and the payments made. The adjusted balance is then multiplied by the sum of days in a billing cycle (ASAP Credit Card, 2012).

The Average Daily Balance Method places charge of 0.04931 per cent of the average daily credit balance. The best method for a creditor is the adjusted balance method. This method is the most preferable method since it results to the lowest charges as interest because new purchases are hardly accounted for during calculation. All payments are deducted from the previous balance before adding interest making it cheap for creditors (ASAP Credit Card, 2012).

The power of compounding interest can be applied in paying for a fut.............