Viktor is a bike tour operator and needs to replace two of his touring bikes. He orders two bikes from the sporting goods store for a total of $2,000 and pays using his credit card. When the bill arrives, he reads the following information:
Balance: $2,000
Annual interest rate: 14.9%
Minimum payment due: $40
Late fee: $10 if payment not received by 3/1/2013
To keep his good credit, Viktor promptly sends in a minimum payment of $40. When the next bill arrives, it looks a lot like the previous bill.
Balance: $1,984.34
Annual interest rate: 14.9%
Minimum payment due: $40
Late fee: $10 if payment not received by 4/1/2013
Explain how the credit card company calculated the new balance. Notice that the given interest rate is annual, but the payment is monthly.