Hot answers tagged

121

This is pretty simple, and doesn’t require too much math. First, talk of liquidity is not necessary. You are currently paying $3000 extra on your mortgage every month. (Nice!) You certainly would have no trouble whatsoever paying cash in full if that turns out to be the smartest option. Second, it is important to note that this “12-month interest free” ...


61

If you pay your statement balance in full before the due date you will never pay a cent in interest no matter what your interest rate is.* In fact, I don't even know what my interest rates are. Credit card companies offer this sort of thing in the hopes you will spend more than you can afford to pay completely in those first 15 months. * Unless you use a ...


59

Interest is calculated daily. Doing the math: Between 6-17 and 7-25 are 38 days, 200.29 / 38 = 5.27 interest per day. Between 7-25 and 8-17 are 23 days. 120.02 / 23 = 5.22 interest per day. The minimal difference is because the principal has already gone down a little bit. So you should expect ~5.20 x number of days for the next interest number coming up; ...


54

The APR is the amount of interest that you would pay if you held their money for a whole year. If you borrowed the £100,000 for a year, didn’t pay anything until the end of the year, and then paid it all off, then you would indeed be paying 20%, or £20,000 interest. However, since you are making payments, each month that goes by the interest charges decrease ...


47

A "cash advance" is when you use your credit card in such a way that you receive cash. For example, if you use your credit card in an ATM machine and receive cash. You should never ever use your credit card for a cash advance.


24

Banks do not profit by your fiscal prudence Banks are in it to make money. But they're expected to provide a social good which powers our economy: secure money storage (bank accounts) and cashless transactions (credit/debit cards). And the government does not subsidize this. In fact, banks are being squeezed. Prudent customers dislike paying the proper ...


23

Ideally you should stop paying interest altogether, which means stop using the card and get it paid off as fast as possible. Then your interest rate is meaningless. The bank has zero incentive to lower your rate if you're paying interest. You could try, but I would be surprised if they made any changes. At best, they might offer a different card and a ...


21

Your mistake is that in your calculation of interest ("10%") you divided the total amount of interest paid by the original amount you borrow. However, you don't pay interest for the original amount borrowed, but for the amount you are still borrowing during the time interval for which the interest is due (e.g. every month). And since the system assumes ...


21

A cash advance from a credit card is either using the card to get cash from an ATM, or sometimes you get checks that you can use. Any outstanding balance on these transactions will accrue interest at 27.5% annually. The big downsides with these cash advances they begin accruing interest immediately, not after balance due date like normal credit card ...


19

First I'm going to make some assumptions based on a single sentence: We've already stopped using the card, the goal is to get out of debt completely. I assume: You and your wife are on the same page and are dedicated to becoming debt free. This is fantastic, and necessary. You may not have been completely financially responsible in the past, but you ...


18

The interest probably accrues daily, regardless of whether your payments are on time.


15

There is a third possibility. The cost of which is free. Use a company provided laptop. Why: cost for the employee is zero. The company is responsible for purchase, upkeep, warranty. The company also takes on the risk that if you quit after 6 months they can reuse the computer for another employee, where if the employee purchases a computer then leaves ...


12

This has been my experience, take it for what you will. I've started a couple small businesses in the past that at one time or another would require the use of my credit card(s). I got in the habit of, with some regularity, calling my CC banks to very politely ask for things, please remove that late payment charge, please lower my interest rate, please ...


8

@Joe's original answer and the example with proportionate application of the payment to the two balances is not quite what will happen with US credit cards. By US law (CARD Act of 2009), if you make only the minimum required payment (or less), the credit-card company can choose which part of the balance that sum is applied to. I am not aware of any ...


8

Question: is there any advantage to purchasing the more-expensive laptop using interest-free finance, as opposed to purchasing the cheaper laptop now? (from one of his comments) Either is fit for purpose, so essentially identical. Yes: retained liquidity. But you've got other, deeper problems if a guy with a $400K mortgage will suffer a serious ...


7

From your question it seems like you are attempting to calculate the total interest based on one cut-off amount whereas credit cards calculate the interest on a daily basis. They arrive at DPR (Daily Periodic Interest Rate) by either dividing your Annual Percentage Rate (APR) by 360 or 365. So in your case it is 0.071% or 0.069% based on how your card ...


6

You might be finding it difficult to arrive at the exact number for a few reasons: they may be using a different interest frequency. For example, they could be working it out daily, monthly or yearly (even though you're paying monthly), but it will change the amount due. you only pay interest on the capital outstanding, so the amount of interest you pay ...


5

There's a cliche, "out of the frying pan and into the fire". I've never had the occasion to use it till now. I understand some people find they have a dozen cards and struggle to keep organized. An extra percent or two seems worth the feeling of just one payment to make. In your case, 3 checks (or online payments) per month shouldn't push you to a bad ...


5

There are several things to consider with this plan. Most low percent for x months cards or offers have a penalty interest rate if you don't completely pay it all off on time. In some cases that will mean that they could hit you with all the interest they could have charged you with, just at the moment you thought you had finished paying off the debt. They ...


5

For just one credit card No. There is no incentive for the card issuer to permanently loan you money for free (Even though they make a small amount of money with every transaction). For several credit cards over time Yes, there are many credit cards that offer introductory 0% APR, often lasting for a year, some even two years. In theory, you could keep ...


5

If m is the monthly rate 0.72% m = 0.72/100 Find the annual effective rate a = (1 + m)^12 - 1 = 0.0899049 so 9% The half-yearly rate h = (1 + a)^(1/2) - 1 = 0.0439851 so the nominal APR compounded half-yearly is 2 h = 0.0879702 so 8.797% The weekly rate w = (1 + a)^(1/52) - 1 = 0.00165696 so the nominal APR compounded week is 52 w = 0.0861617 so 8.616% ...


5

As theonlydanever mentions, you can get somewhere if you add the credit facility fee and the completion fee. However, I have had to add them to the balloon payment to reach the loan figure. This doesn’t account for the credit facility fee also being paid with the first payment. Also the completion fee is included in the loan and generates an interest ...


5

A "balance transfer" is when you use one credit card to pay off another. Say you get credit card A with a 24% interest rate. You put $5,000 on this credit card. Later you get credit card B with an interest rate of only 12%. So you get company B to pay off what you owe on card A and put that amount on card B. Now you are paying only 12% on your $5,000 ...


4

If your investment is growing at the rate of x% per period, then after n periods, it will have grown by a factor of (1+x/100)^n. This formula also applies when n is not an integer. So, the investment will double in value for whatever n is the solution to the equation 2 = (1+x/100)^n If you take logarithms on both sides and solve the equation, you can ...


4

Paying off a loan early isn't a bad thing. Having a credit card for 6 months and then closing it is probably unneeded; pay it off and then keep it as an emergency card. The key is debt:available credit ratio. Look at this article for example which explains the different elements; the only one you're affecting here is the second, your debt load. If you'...


4

does that mean that 30% of my monthly payment goes to interest? No, it's much worse then that. The APR is the annual percentage rate. An APR of 30% on $23,000 in debt that means you'll be charged $6,900 in interest for the year. You'll actually owe slightly less since you are reducing your principal slightly over the course of the year. If your monthly ...


4

The first thing you need to do is look at your terms and conditions of your credit card, or ask your bank, how they will apply the payments. As Dilip notes in his answer, in the US, they will likely apply the minimum payment to the lower rate balance, and then must apply the rest above the minimum to the higher rate balance. In other countries, this will ...


4

It is kind of standard practice, and the way you are proposing you should be just fine provided nothing goes wrong. As I understand it, you will get a new 0% card and charge this large purchase on it. Many get into trouble when something does go wrong such as missing the end of the zero percent, or missing a payment. Anything of those kind of situation ...


4

My credit score is somewhere around 790 and I still have ~20% APR on most of my cards. I've been fortunate enough to pay off the total balance monthly so I do not care what APR I have but my credit score doesn't seem to affect my APRs. You need to sit down and figure out how many payments it will take you to get out of debt and stick to making those ...


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