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Established Contributor
laboi_22
Posts: 634
Registered: ‎07-07-2011
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What's the Big Deal with APRs?

[ Edited ]

I often see people here slamming cards for high APR. Of course there are those who say "if there are good rewards and you PIF APR should not matter". I also read lots of reviews about credit cards. In particular store credit cards. They are always getting a bad rep for high APRs. Yes they do have high APRs but when you think about it, unless you are carrying a VERY VERY large balance, it's not that bad. I recently obtained the Buckle card because their jeans are expensive, but I love them. I didn't get the card for rewards as much as for the ability to pay in store, in easy to pay installments. For example here is my last jean purchase and how I broke it down:

 

I knew that my statement period had just begun. I wanted some jeans that were going to cost me $204 with tax. I purchased them:

 

Before the statement due date (about 25-30 days) I went in store and made a payment of $65 and some change so that I now owe an even $139. I then took out my handy interest calc and here is my payment plan:

 

month 1: $71,72

month 2: $71.72

 

I will have paid a total of $4.44 in interest for making 3 monthly payments that are easy to pay right in store, and now I have a pair of amazing jeans to boot! So $4.44 is not that much for me (based on 24.99% APR).

 

So is $4.44 really that expensive to carry a balance? I don't really mind the extra $4.44. I realize that that amount will take away from the amount of rewards I would have earned, but who cares. I didn't get the card for rewards per say. You can only earn $10 any way per quarter. What does $10 buy you at Buckle? Not a thing!!

 

Thoughts...

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Established Contributor
YahComb
Posts: 599
Registered: ‎03-10-2012
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Re: What's the Big Deal with APRs?

well, many of the store cards are places where people are likely to carry a very high balance-hardware stores, furniture stores, amazon. Not all of them have amazon's 0% APR for X months when you make a big purchase.

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Senior Contributor
youngandcreditwrthy
Posts: 6,242
Registered: ‎08-16-2012
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Re: What's the Big Deal with APRs?

You just answered your own question...
Sure, it's okay to toss a creditor a bone with a few bucks in interest but say you carried a $2,000 bal on your BKE Card at 24.99%, then in a year, you'd pay something for like $500 in interest (very rough estimation). Just pif or as you are doing, limit balance carrying :-)

I love BKE btw! Was my first job ever in 2006, and I still have plenty of jeans to show for it... Ohhhhhh how I wanna get that BKE Card!! Lol but I can't app for any more accounts atm LOL!
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Established Contributor
laboi_22
Posts: 634
Registered: ‎07-07-2011
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Re: What's the Big Deal with APRs?

I can see the point that when carrying a balance (a large one), it can get costly especially if you only pay the min payment due. I love Buckle too. Wish I could get that 40% discount LOL for working there.

 

You don't have to apply for the Buckle card. It will be a SP if they pre-approve you. Just create an online Buckle account, add somethings to your cart, act like you are checking out, and if you are pre-approved you can accept and it will tell you your CL and open the account which you can then start charging to right away. The only factor that will be affected is AAOA but if you opened a bunch a recent accounts might as well take a SP and open another and let them age together, just my thoughts!

Current Scores: EX - 728 FICO (5/11/13) TU - 771 FICO (7/02/13) EQ ??

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Valued Contributor
navigatethis12
Posts: 1,951
Registered: ‎01-24-2012
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Re: What's the Big Deal with APRs?

I don't get the rate fixation either. A lot of the cards I have have the highest rate since my history is so young and it does not bother me at all. I have never carried a balance and do not plan to.

 

Anyway, most people do not plan to carry a balance for a long time. Like you, they think they will be able to pay it off in a few months. Then they lose their job and were not saving money and the balances keep getting higher and higher. Another scenario is an emergency happens and they have to use all of their cash reserves. Without any money, those few months turn into six, then twelve, and so on.

 

In my opnion, you should avoid carrying a balance as much as possible. It may only be $4, but that is $4 you could have saved if you saved up for the clothes. I don't mean to knock you, but $200 for jeans seems silly, especially if you cannot afford them.

Established Contributor
Koop10010
Posts: 731
Registered: ‎02-15-2012
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Re: What's the Big Deal with APRs?


navigatethis12 wrote:

I don't get the rate fixation either. A lot of the cards I have have the highest rate since my history is so young and it does not bother me at all. I have never carried a balance and do not plan to.

 

Anyway, most people do not plan to carry a balance for a long time. Like you, they think they will be able to pay it off in a few months. Then they lose their job and were not saving money and the balances keep getting higher and higher. Another scenario is an emergency happens and they have to use all of their cash reserves. Without any money, those few months turn into six, then twelve, and so on.

 

In my opnion, you should avoid carrying a balance as much as possible. It may only be $4, but that is $4 you could have saved if you saved up for the clothes. I don't mean to knock you, but $200 for jeans seems silly, especially if you cannot afford them.


I have to agree with this.  I also don't really care about my cards interest rates, I've never carried a balance and don't forsee it happening anytime soon.  That being said, a lot of the time, people don't intend to carry balances for the long haul.  They make a large purchase and plan to pay if off in like 3 months, but then something happens and their expenditures go up or their income goes down and 3 months becomes 6 months, 12 months or longer while the interest racks up.

Also, about the jeans.  I'm sorry, but I just can't see paying that much for a pair of jeans, especially if you have to finance them.  I get my jeans at Walmart for $15.  I mean, it's your money, but I can't believe you can't put it to a better use than that.

 

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Valued Contributor
jsickz32
Posts: 1,987
Registered: ‎06-25-2012
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Re: What's the Big Deal with APRs?

Everyone has something they like to spend their money on so if op likes to spend 200 on jeans then its fine. I spend 150 on 1 pair of shoes so i dont think its big deal really. and seriously carrying a balance is seen as such a bad thing on this forum is crazy.
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Established Contributor
Cdnewmanpac
Posts: 766
Registered: ‎01-16-2012
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Re: What's the Big Deal with APRs?

I don't use store cards, so can't address anything about them specifically. But one reason some of us want a low-APR card in our arsenal is because things happen unexpectedly. For example, kids. Or hailstorms (roof) or cars break down. Or the opportunity cost of paying cash exceeds that of the total interest payments. There are lots of sound economic reasons to purchase things with borrowed money. Suppose you have a card with a baseline 7% interest rate and you want to replace your old, inefficient woodburning fireplace with a new gas insert. In our case, this would cost about $4000. We could save for a year and pay cash, but continue to pay the cost of wood, higher electric/gas costs to compensate for the heat loss through the chimney and the loss of enjoying a simple to use, efficient, pleasant looking gas fire. Or we could pay for it with a credit card and pay it off over one year. We'd pay $154 in interest, but have the use/enjoyment/efficiency of the insert for an entire year. A rational person might decide that the year's use is worth $154. However, with a 29% interest card, that interest cost for the same 12 months goes to $688. Something very few people would rationally choose. So lower interest cards allow carrying a balance to be a rational choice rather than a desperate measure.

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Established Contributor
Koop10010
Posts: 731
Registered: ‎02-15-2012
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Re: What's the Big Deal with APRs?


jsickz32 wrote:
Everyone has something they like to spend their money on so if op likes to spend 200 on jeans then its fine. I spend 150 on 1 pair of shoes so i dont think its big deal really. and seriously carrying a balance is seen as such a bad thing on this forum is crazy.

I don't think financing something is always bad, but it depends on what it is.  If there's a storm and your roof is destroyed, you need to get a new roof, even if it takes a couple months to pay for.  If your car's transmission goes, you need to get that fixed right away even if you can't pay for it all right now, so you can get to work.  It's the financing of luxery items that's really a bad idea.

If you're in the position where you want that $200 pair of jeans and you can pay for it right away without any difficulty, then go ahead, there's nothing wrong with that.  It still seems a little crazy to me, but whatever, it's not my money.  But having to go back to the store every month to make payments on a pair of jeans is absolutely nuts to me and doesn't seem like healthy financial behavior.

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Established Contributor
migliogiorni
Posts: 657
Registered: ‎06-27-2012
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Re: What's the Big Deal with APRs?

I personally would not pay 200 plus for jeans, but who am i to talk I love Air Force 1's and those will cost me 100.  More power to OP, it's all about managing credit and having a plan.

 

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