You take out a cash advance of $2,790.00 on a credit card with a 3.5% cash advance fee and a 13.5% APR. What is the amount due by the end of the month?

Question

You take out a cash advance of $2,790.00 on a credit card with a 3.5% cash advance fee and a 13.5% APR. What is the amount due by the end of the month? 

Answer 1

The first thing to consider is that when computing the APR for one month you must divide the interest rate by 12 since the 13.5% is based annually. 13.5% is equivalent to .135 in decimal form. But then when we divide it by 12 we get, (.135)/12 = .01125 which is your monthly interest rate versus your annual one. When multiplied by the amount of the cash advance you come up with the following fee: 

 

(principle)(monthly int. rate) = total interest charged for month

    ($2,790)(.01125)             = $31.3875

 

The next thing to consider is the additional charge of the 3.5%. This is equivalent to .035 in decimal form. When multiplied by the amount of the cash advance you come up with the following fee:

 

(principle)(advance int. fee) = total cash advance fee

    ($2790)(.035)                 = $97.65

 

 

So the total amount due at the end of the month would be $2790 + $31.39 + $97.65 = $2919.04 after interest rates and the additional fee gets applied.