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interest configuration on credit cards vs. bank loan

562 Views 7 Replies 6 Participants Last post by  ChattyCat
So I was wondering about interest rates. If I have a credit card that charges 9.9% interest, and I have a car loan through a bank at 9.9% interest, do I ultimatel pay the same ammount over time if I were to make the same payment each month. Is the intereste configured the same way, or do credit card companies compund differently?? I *really* want to know!!!!

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It would depending on the term on the credit card. I don't know jack about this but I looked up a calculator so you need to know some numbers (minimum payment % and minimum payment amount) before hand to do a good comparison. Here is the calculator that I found:

Good Luck,

If you're actually paying off the credit card in the same amount of time and not adding anything new to it, then yes, I think it should be the same. However, credit cards payments aren't structured for paying off balances. If you pay the minimum balance, then it'll never be paid off.
It really depends on how the balance is computed, and how often the interest is tallied.

A lot of credit cards use a two cycle balance, which can either be the highest amount you've owed in the past two cycles or an average of the past two cycles. So, even after you've paid down the principle, you're still paying interest on it for a little longer. But, credit cards only compute interest 1x a month.

With a bank loan, they may compute interest more often, but it's still likely to only be once a month. And, it really depends on how they calculate the balance on which they're charging the interest.

To determine which is better, you really need to look at the terms of the loans.
Don't forget that the credit card will jack your interest up if you are late one time!
check your hidden fees as well (insurance, late fee penalties, how interest is calculated (I have found some really interesting discrepancies between payment recieved and credited...)

But ultimately the bank loan will be cheaper if you cut the card.
As you can pay off 1000 on a cc then....jack it up again! A bank loan you really can't. Also the bank will put a lien on your car usually as its secured against it, puttting it on the cc might stop those fees (our bank charged us $50 a year to check the car was still in our name)
Well we are basically trying to decide which to use. We are wanting to build a very modset alternative house, and are likely going to run into trouble getting a construction loan, because there is no fair market value comparison houses in the area. Our other option was a personal loan, for a minimum of 2 years at 13%, but our credit cards have a lower rate, one has 9.9% and I think one is even 7.9%

That would be much lower that the personal loan. We'd probably only need about 18K, because we already have some money saved. We aren't really credit card people and have no other debt, so this would be it. We just thought it might be an alternative way of financing our building costs unless interest was figured in some screwy way...

Hmmm... does that sound like a bad idea??
It really depends on how the cc company figures the balance on which to compute the interest. To compare apples to apples, you'll need to get all the details for the various loans. How they compute balances, how often they compound interest, the interest rates, any other fees, etc. will all make a difference. What looks good on the surface may not be the better deal. It can be a little daunting, but if you take the time to figure it out, then you'll have peace of mind for the next 2 years that you got the best deal.
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