Please help me out real quick? Interest question

[honey-lilac]

I have never charged more on my credit cards than I would be able to pay off that month, so this has never come up before.

I just found out that tomorrow I will have to charge about $9000 to my card (which has a 15% annual interest rate, I just found that out) tomorrow. I will not be able to pay it off this month, although I will be able to pay off part of it. How do you figure out how much the balance is going to go up every month? If the 15% is annual, then how does that work with months, etc.

Basically, if I can pay off $3000 a month, how much more will I end up paying than if I was using cash? (That's actually not the correct figure of how much I can pay a month, but I need a formula or something ASAP to be able to figure this out.)

[velochic]

IIRC, the calculation is ($n/30) X (rate/12) where "n" is the amount borrowed or daily average and "rate" is your APR. So for yours it would be ($3000/30) X (.15/12). That will give your daily rate, $3.75 (I'm assuming they use daily average balance to calculate the interest as most do.) The charge for the month will be the $3.75 X number of days in your billing cycle for that first month when the balance is $9K.

If you pay early or charge, these numbers change. And as you pay it off, obviously the numbers change, but as long as you know your daily average, you can closely calculate the interest you'll pay.

Good luck!

[honey-lilac]

Whew, that's a tad complicated, but thank you! That helps a lot!

[honeybunmom]

Also, with the new credit card laws, your first bill with this balance on it will give you the breakdown of how long it will take to pay the bill if you pay just the minimum and the cost of financing associated with that. Additionally, it will show you how much more quickly it will be paid if you pay some higher amount each month. I know you intend to pay it off in short order, but, just wanted to let you know that you will get this additional information on your bill, now.

[leavemealone]

It's not really easy to answer. Here is one site that might be helpful http://www.consumercredit.com/CC-interestCalc.htm

[honey-lilac]

I'm not sure I get the point of that calculator... I would be paying much more than the minimal payment? I'm confused...

[GoBecGo]

Does it work better if you enter what you WILL be paying, rather than the minimum payment?

[honey-lilac]

Hm, yes it does... Though it comes up with a way different (and higher ) number than the first formula in the thread.

[velochic]

Originally Posted by Kaleanani

Hm, yes it does... Though it comes up with a way different (and higher ) number than the first formula in the thread.

Remember, though, that the formula I gave you has to be calculated for every cycle you carry a balance. That's not the TOTAL you pay for all the months you carry your balance. So if you carry $9K on your card for 30 days, then you'll have $112 or so dollars in interest in just the first month alone. If you pay $3K, then you have to calculate your interest on $6112 for the next cycle, then you pay it down and calculate on the next daily average balance, etc.

I don't know what the other calculator does, but I looked it up and the formula I gave is correct. You just have to calculate it every month to see how much you are going to pay for the whole life of carrying a balance. Did you do that?

[leavemealone]

Do you know what method your card uses for calculating interest? Adjusted Balance Method? Average Daily Balance Method? Previous Balance Method? Two-cycle average daily balance? The amount of interest you will pay can vary by the method your card uses. It's going to be very difficult to calculate the exact amount.

[velochic]

Originally Posted by sandcastle

Do you know what method your card uses for calculating interest? Adjusted Balance Method? Average Daily Balance Method? Previous Balance Method? Two-cycle average daily balance? The amount of interest you will pay can vary by the method your card uses. It's going to be very difficult to calculate the exact amount.

True, and it will also depend on if it's compounded daily or not. If so, it may even get more complicated because it might not start compounding daily until after you carry a balance for a month... and then it might be retroactive after that. You really need to look at your user agreement on your card. I'm not sure, but I think that paperwork might even give you the formula you want for your particular card.

[leavemealone]

Velochic's formula and the online calculator can give you a rough estimate of how much interest you will pay, but it's going to be hard to know b/c of how complicated the credit card companies can make it. However, as everyone knows, the quicker you pay it off, the better.

I don't think it will be an excessive amount if you can pay it off over 3 month with $3000 payments, but it will still be something. I don't know what method the online calculator I posted uses, but when I put in a $9000 balance, with 15% interest, and $3000 minimum payment, it comes out at about $232 interest. I didn't fill anything in for column C. That's a rough estimate and there probably are online calculators that can show how much interest is calculated by what compounding method.

[honey-lilac]

Ugh. This all reminds me why I am nearing 30 and never carried a balance before - too much effort to think about interest rates.

Thanks for all the help though, guys, at least it's a rough estimate if not exact figures. Thanks!

[Knittin' in the Shade]

Not sure what it is that you'll be putting on the card,butisthere any chance you can get a small loan from your bank instead of going the CC route? Seems like you'd probably pay far less interest and it would be much more straightforward. The cc caluclations are making my head spin, LOL!

[honey-lilac]

Pretty sure no bank would give us a loan as neither my husband nor I have a formal income.