##### Re: NUFCU Credit Card - App or no app?

11-14-2012 07:50 PM

mum4519 wrote:

For some reason, which I still need to disprove myself, I figured a cash advance accruing interest daily would end up being more over the course of the next 11 months then a payment with a grace period on interest. Eleven months of daily interest scares me but all in all if I can figure out how to do the math, may end up saving me!

And yes, the cash advance is completely free up to the credit limit and same APR (6.65%) as if I were to make a purchase. By far the best "credit card" I have, only minus a rewards program.

Well, compound interest goes as something like (1+rate/n)^n where n is the the number of times compounded. Doing a quick check, if you made no payments,

2300 (couldn't recall the actual balance) at 6.6% compounded daily would be $2456.91 after one year. If it were compounded monthly, it would be 2,456.48, so the compounding makes very little difference.

In contrast, 2300 at 10.8%, compounded monthly becomes $2561.07

So a big savings. Paying it down reduces the difference of course, but it is still there. Now you would have to do more precise calculations if the choice was say 6.6% compounded daily and 6.7 monthly, but 6.6 to 10.8 is a huge difference, and the naive view, go with the lower rate, works fine here.