I don't know how APR works.

[Booner72]

Sorry to be dumb here.  But I thought that if I owed 100 dollars on a card, and my interest rate is 25% for a store card, that my interest if I didn't PIF would be 25.00 for that month.

However, I notice it says A PR as in ANNUAL.  Does that mean its 25 a YEAR for every 100 not paid?  But what if you only carry the hundred 6 months?

Thanks for the math lesson!

[Juan123]

i think it would be $100 x 25% / 12 (for the 12 months)  so it'd be like $2 interest every month.... unless im mistaken >_<

if you dont carry it i guess they prorate it? im not 100% sure im just guessing.

[Anonymous]

($100 x .25) / (1/12) for one month
($100 x .25) / (3/12) for 3 months
($100 x .25) / (6/12) for 6 months. On and on. Thats 25% apr

[Anonymous]

You are correct (kinda).  APR = Annual Percentage Rate.  So if you carry a $100 for a year, you will end up with $25 in interest charges for the YEAR.

To calculate your monthly interest, take your balance (technically, your average daily balance, or ADB, but that complicates it more than necessary for this example), and multiply it by your APR/365*30 (Annual interest/days per year = daily interest rate, times the number of days in the billing cycle [30 on average]).  So $100*0.25/365*30 = $2.05 interest for the month.  So in your example, if you only did it for 6 months then paid it off in full, you get $100*.025/365*30*6= $12.33  (oversimplified calculation, as you would be making payments along the way, but for a basic overview, it is close enough).

Look at the bottom of your CC statement and you should see a similar calculation each month.

[ChesterPDexter]

Here's how I do it.  Make the 25% into a decimal.  That's .25

Then divide that by 365 for the days in the year.  The result is:  well, you'll see it on the calculator but it's too long to print here because it has an "e" in it on my calculator.

Multiply that result by the number of days in the billing cycle (some cycles are 28 days, some are 30, and some are 31.)  Let's say 30, and the result is 0.02

Take your average daily balance (that's how most but I guess not all, companies compute interest.)  Let's say it's $100, and multiply it by the result above...

And your answer is $2.05.

So you should be charged that much in interest for the month.

[Booner72]

OOOOOOH!!!!!!!!!!!!!!!!!!!!  I GET IT NOW!!!!!!!!!!!!

Wow, well that's good news, then.  JEEZ.  I've been freakin out about DH's Lowe's bill that has about 250 on it and I thought we were going to pay over 50 dollars a month in INTEREST for it.  What a relief.

i think I got this bc our truck was at 24.99% until we refi'd and I knew that was 25.00 per 100 per month.  So auto loans do it different, then?  They call it "simple interest?"

THANKS YOU GUYS

[GregB]

24.99% on a car is still 24.99% per year or 2.0825% per month, which is a horrendous interest rate.

[ChesterPDexter]

Installment loans (like a car loan) often load up the interest in the beginning of the loan.  It decreases over time and by the end of the loan, more principal than interest is being paid.  Look up "amortization schedule" to learn more about that.  That's completely different than interest on revolving debt like credit cards.

[Booner72]

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@GregB wrote:

24.99% on a car is still 24.99% per year or 2.0825% per month, which is a horrendous interest rate.

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Really?  I thought that was a pretty good deal.

[dalebb]

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@Booner72 wrote:

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@GregB wrote:

24.99% on a car is still 24.99% per year or 2.0825% per month, which is a horrendous interest rate.

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Really?  I thought that was a pretty good deal.

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25%? passes out and hits the foor