Question: I have a credit card with an outstanding principal balance of ₹20,000. The bank charges an interest rate of 3.5% per month. I missed the due date, incurring a flat late payment fee of ₹500. If I make no payments and no new purchases, exactly what will be the total outstanding balance at the end of the first billing cycle, assuming the bank adds the late fee to the principal before calculating the monthly interest?
Answer: The total outstanding balance will be ₹21,217.50. First, the late fee of ₹500 is added to the ₹20,000 principal, making the balance ₹20,500. Then, the 3.5% monthly interest is calculated on ₹20,500 (20,500 × 0.035 = ₹717.50). Adding the interest, the final balance is ₹20,500 + ₹717.50 = ₹21,217.50.

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