Credit Card Interest Rate Tips

Author: mattrado
Posted: Wed Aug 23, 2006 2:09 pm
Post subject: Basic credit card interest question

New to the board... got my first card about a year ago... trying to build my credit steadily.... thanks in advance....

focus:

I am curious about minumum payments for credit card bills. I know that if a payment is late/under the minimum, then one will get charged a HUGE interest penalty (the penalty structure varies from card to card). But my quesiton is this:
Is there ANY interest charged on the REMAINING balance if a minimum payment is made ON TIME? If so, is this amount the basic APR of the card? Or is the stated APR something different?
I guess I'm curious where all of the places are where I could possibly be charged interest, and I'm also curious where the basic APR is applied versus some other type of interest.

If there is a link that will answer these questions in a straightforward manner, and I missed it, I apologize.

Thanks in advance,

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Author: rapjunkie
Posted: Wed Aug 23, 2006 2:32 pm
Post subject:

When you make the minimum payment on time, you will be charged interest at the stated APR on the remaining balance for the next billing period since that's the period in which you are carrying a balance.

Any interest percentage you see on your statement other than the stated APR for purchases or cash advances will be something like a promotional APR (listed in the same area as the purchase & cash advance APRs) or the effective APR (APR of that particular billing period as a result of the different types of fees you may have incurred or different APR rates applied to different balance amounts... basically just a simplified look at your total finance charges stated as a single APR percentage).

That probably sounds a bit complicated. The simple version is you will be charged interest in the following billing period on any amount you don't pay off by the due date of the current billing period.

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Author: Evilbunny
Posted: Wed Aug 23, 2006 2:40 pm
Post subject: Credit Card Interest Rate Tips

I'll tell you the secret formula:

APR/365*ADB/100*DBC

APR = Annual Percentage rate
ADB = Average Daily Balance
DBC = Days in Billing Cycle.

at least that is how we do it here. of couse.. everyone always tells me that other banks dont calculate finance charges like we do. and never penalize them, or charge them Residual Finance Charges or reprice them, or make them pay a minimum payment every month.. lol

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Author: mattrado
Posted: Wed Aug 23, 2006 4:01 pm
Post subject:

thank you both for the responses, that all makes good sense.

So essentially the whole "minimum payment" thing is just credit card companies allowing you to pay over time on THEIR schedule, while charging you interest on your debt?
Is the best thing to simply pay off your balance in full every time? Is there any benefit to your credit to make installment payments?

thanks again,

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CardRatings.com is the most comprehensive source for comparing credit card offers. Please visit CardRatings.com to view the best rated credit cards!

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