Credit Cards Methods of Calculating Finance Charges - Know More, Pay Less
Interest rate or annual percentage rate (APR) measures the cost of
credit expressed as a yearly interest rate. This can vary from 8 to 21
percent, but may actually be much higher, depending upon how the
interest is calculated.
Under the federal Truth-in-Lending Act,
creditors must disclose this figure. Find out if the rate is fixed or
variable.
Interest is calculated in many different ways, so that the same balance
will cost more on one card than on another, even though they have the
same APR.
In another example suppose a consumer receives a statement July 1 with
the following information:
Previous balance as of June 1 $300
Payment (on June 15) $200
Purchase (on June 15) $100
The annual percentage rate (APR) is 18 percent a year, or 1.5 percent a
month. Using various methods, interest can be calculated on:
The adjusted balance method takes into account payments that have been
made. He/She would be charged $1.50 (1.5 percent, or .015 times the
adjusted balance of $100), or interest on $300 minus the $200 payment.
This method is the most economical.
The average daily balance method, including newly billed purchases,
would cost $3.75 (1.5 percent, or .015 times the average daily balance,
which was $300 for the first half of the month and $200 for the last
half, for an average balance of $250). This eliminates the grace period
on all new purchases.
The average daily balance method excluding newly billed purchases would
cost $3.00 (1.5 percent, or .015 times the average daily balance, which
was $300 for the first half of the month and $100 for the last half, for
an average of $200).
The previous balance, which would cost $4.50 (1.5 percent, or .015 times
the previous balance of $300). The $200 payment does not affect the
interest charged.
If you are deep in credit card debit, emotionally overwhelmed with monthly bills, are seeking relief and would like to regain a foundation of financial strength on solid ground contact Paul to discuss your options.
info @ PaulFDavis.com
407-967-7553
http://www.PaulFDavis.com - consumer advocate and life coach for success
credit expressed as a yearly interest rate. This can vary from 8 to 21
percent, but may actually be much higher, depending upon how the
interest is calculated.
Under the federal Truth-in-Lending Act,
creditors must disclose this figure. Find out if the rate is fixed or
variable.
Interest is calculated in many different ways, so that the same balance
will cost more on one card than on another, even though they have the
same APR.
In another example suppose a consumer receives a statement July 1 with
the following information:
Previous balance as of June 1 $300
Payment (on June 15) $200
Purchase (on June 15) $100
The annual percentage rate (APR) is 18 percent a year, or 1.5 percent a
month. Using various methods, interest can be calculated on:
The adjusted balance method takes into account payments that have been
made. He/She would be charged $1.50 (1.5 percent, or .015 times the
adjusted balance of $100), or interest on $300 minus the $200 payment.
This method is the most economical.
The average daily balance method, including newly billed purchases,
would cost $3.75 (1.5 percent, or .015 times the average daily balance,
which was $300 for the first half of the month and $200 for the last
half, for an average balance of $250). This eliminates the grace period
on all new purchases.
The average daily balance method excluding newly billed purchases would
cost $3.00 (1.5 percent, or .015 times the average daily balance, which
was $300 for the first half of the month and $100 for the last half, for
an average of $200).
The previous balance, which would cost $4.50 (1.5 percent, or .015 times
the previous balance of $300). The $200 payment does not affect the
interest charged.
If you are deep in credit card debit, emotionally overwhelmed with monthly bills, are seeking relief and would like to regain a foundation of financial strength on solid ground contact Paul to discuss your options.
info @ PaulFDavis.com
407-967-7553
http://www.PaulFDavis.com - consumer advocate and life coach for success
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