Credit Card question

[vanity]

How do I calculate my monthly interest payment?

I thought it would be (APR*Amount owed)/12

ie:
(.2999*2200)/12 = $54

but according to my statement, they charged me $69.

 

[LabelKing]

Aren't there interest calculators on the internet?

A simple interest formula would be Amount=P(1+rt) where P is initial amount, r=interest rate, and t=time in years.

 

[vanity]

There are but they're for calculating monthly payments, how many years to pay the loan, and things of that sort. I'm not concerned about that, I want to knwo what formula they use that looks at your balance, looks at your APR, then says; "This is the interest charged this statement". Not the minimum, but the "Finance Charge" tacked onto my bill for interest alone.

Their calculations are coming in higher than mine.

 

[bryce330]

It is calculated based upon your average daily balance for the billing period, not your balance at the end of the month (or whenever the statement is issued).

 

[vanity]

This looks like it explains it but I cannot understand.

http://en.wikipedia.org/wiki/Credit_card_interest

 

[billiebob]

Some credit cards use the average daily balance from the LAST TWO billing periods (instead of the present billing period) to calculate interest for the present period.

A friend had a card that charged interest for the previous billing cycle, present billing cycle, and eliminated the grace period for the NEXT billing cycle when he switched from paying the card off every month to carrying a balance. So if you're used to paying the card off, and are late 1 month, you pay interest on 3 months of average daily balance. I'm not sure what this scheme is called, but I think it's common.

 

[vanity]

God I hate these ******* bastards. I saw a program on Frontline about the credit card industry and vowed to never use a card again. I've paid off 2 cards in 2 months but my other two will take me until the end of the year. At least this is promising: http://hosted.ap.org/dynamic/stories...MPLATE=DEFAULT *Frontline available for viewing in full here: http://www.pbs.org/wgbh/pages/frontline/shows/credit/

 

[Dakota rube]

Originally Posted by billiebob

I'm not sure what this scheme is called, but I think it's common.
In some languages, it is called "theft".

As to vanity's OP: these guys are correct. You're paying interest on some form of an average daily balance.

 

[Joffrey]

I got my first credit card a few months ago and focused on getting one that doesn't allow for carrying balance. Other than that other items I buy on credit are large items (PC, TV) that I get using a stores card (Best Buy, Office Depot) and take advantage of no interest payments for a set time period (Office Depot and Best Buy have 6 months for new Credit card applications, and during major holidays offer 12-18 months no interest periods).

Otherwise purchasing on credit (and thus carrying a balance) encourages living above your means.

 

[EL72]

Try to get a line of credit from a bank at a more reasonable rate (prime +1 or 1.5%) to pay off credit card debt. Cards are for convenience (and miles/points...), not for borrowing $.

That said, I just received an offer from MBNA for a no interest for 12 months platinum MasterCard so I transferred $40K of line of credit debt to that card and will pay no interest for a year (except for 1% transaction fee) - woohoo! I hope to pay it off within a year or transfer whatever balance back to my LOC next year. Since I just bought a house and reno costs are going on the LOC, this will save me at least $2,500 in interest expenses

 

[vanity]

I went the bank loan route with Chase bank. Even though I've been with my employer for 4 years and lived at my last residence for 3 years, I was denied b/c I moved 8 months ago. I guess you can't get loans if you decide to move?

Perhaps I should shop other banks.