topic Question about interest rates in Credit Cards

Question about interest rates

Anonymous — Wed, 05 Aug 2009 18:00:04 GMT

Ok sorry this is a long post but I need to get this settled. My accounts are as follows:

Chase amazon : CL of $2,000 balance of $1,079.57. Yes I know it's high.

APR:

27.24%

Capital 1: CL $500 balance: $258.77. Yes I know high again...

APR: 15.05%

My question is what is the interest calculated from? The balance? I'm sorry this is such a basic question but i've bended my mind all day researching and I'd rather take the easy route and just look for a direct answer.

Should I call chase and ask them to lower my APR?

Thanks for the help.

Re: Question about interest rates

MarineVietVet — Wed, 05 Aug 2009 18:23:36 GMT

My question is what is the interest calculated from?

This is from my latest Cap 1 statement:

Average Daily Balance (Including New Purchases) .
Finance charge is calculated by multiplying the daily
balance of each segment of your account (e.g., cash
advance, purchase, special transfer, and special purchase)
by the corresponding daily periodic rate(s) that has been
previously disclosed to you. At the end of each day during
the billing period, we apply the daily periodic rate for each
segment of your account to the daily balance of each
segment. Then at the end of the billing period, we add up
the results of these daily calculations to arrive at your
periodic finance charge for each segment. We add up the
results from each segment to arrive at the total periodic
finance charge for your account. To get the daily balance for
each segment of your account, we take the beginning
balance for each segment and add any new transactions
and any periodic finance charge calculated on the previous
day's balance for that segment. We then subtract any
payments or credits posted as of that day that are allocated
to that segment. This gives us the separate daily balance for
each segment of your account. However, if you paid the
New Balance shown on your previous statement in full (or if
your new balance was zero or a credit amount), new
transactions, which post to your purchase or special
purchase segments are not added to the daily balances. We
calculate the average daily balance by adding all the daily
balances together and dividing the sum by the number of
the days in the current billing cycle. To calculate your total
finance charge, multiply your average daily balance by the
daily periodic rate and by the number of days in the billing
period. Due to rounding on a daily basis or due to minimum
finance charge assessment, there may be a variance
between this calculation and the amount of finance charge
actually assessed.

There. Clear as mud right?

Re: Question about interest rates

Anonymous — Wed, 05 Aug 2009 18:40:19 GMT

omg I literally LOLed out at your response. What is the daily periodic rate? I think I can do the rest if I know that.

Nadia

Re: Question about interest rates

Anonymous — Wed, 05 Aug 2009 18:58:44 GMT

the end result you are charged 1/12% of daily average balance for the cycle

compounded daily which it's recomending people large balance pay weekly

rate /365 daily periodic rate

Message Edited by rbbyrbsn on 08-05-2009 11:58 AM

Re: Question about interest rates

GregB — Wed, 05 Aug 2009 18:55:56 GMT

The daily rate should be printed on your statement where it lists the balance and the interest rate. It will list both the yearly rate and the daily rate. Otherwise simply take the yearly rate and divide by 365. That should be very close.

Re: Question about interest rates

Anonymous — Thu, 06 Aug 2009 02:16:15 GMT

The average daily balance is listed where? Sorry still confused =(

Re: Question about interest rates

Anonymous — Thu, 06 Aug 2009 02:27:44 GMT

And I mean this truly and utterly in a caring way, but I would not use your cards any more until you understand more about them.

Please read:

Ultimate Guide to Credit Cards

Re: Question about interest rates

Anonymous — Thu, 06 Aug 2009 03:36:19 GMT

Not sure if just want to know how to calculate the math or know to what amount the APR is applied. If you just want to know the balance amount used, go to the end of you statement where it states what your APR is. In that section, it will list for you the rate info, the balance used, the amount of days in the cycle and the finance charge you are assessed.

I dont do math so that is what I use

@Anonymous wrote:
Ok sorry this is a long post but I need to get this settled. My accounts are as follows:

Chase amazon : CL of $2,000 balance of $1,079.57. Yes I know it's high.
APR:
27.24%

Capital 1: CL $500 balance: $258.77. Yes I know high again...
APR: 15.05%

My question is what is the interest calculated from? The balance? I'm sorry this is such a basic question but i've bended my mind all day researching and I'd rather take the easy route and just look for a direct answer.

Should I call chase and ask them to lower my APR?

Thanks for the help.

Re: Question about interest rates

MarineVietVet — Thu, 06 Aug 2009 04:42:58 GMT

@Anonymous wrote:
The average daily balance is listed where? Sorry still confused =(

I wouldn't worry all that much about the average daily balance. If you are like alot of people including me you carry a balance forward from time to time and only need to worry about the balance showing when your statement posts each month. Interest on CC's is calculated daily and the average daily balance is just one figure used to determine monthly finance charges. I will use one of my statements as an example and then figure approx. what your finance charges will be.

The BoA account I just paid off had a balance of $7,012.75 when it posted on 7/15/09. The finance charge was $50.59 from the previous month. This is how that was figured: my APR is 7.90%. Divide that by 365 to get my daily periodic rate of .021644. Multiply my balance of $7,012.75 X .021644 X 33 (which is the number of days in the billing cycle last month. The number of days can vary). This gets us to the finance charge of $50.59. It's easier for me to use a decimal when multiplying the number of days, i.e .33 instead of 33. It all gets to the same place.

Now let's do yours. Your Cap 1 had/has a balance of $258.77. Your daily periodic rate is .041232 (15.05% APR / 365). So you have $258.77 X .041232 X 30 days in the billing cycle (I picked 30 days for simplicity). Your finance charge will be about $3.20.

Your Chase had/has a balance of $1,097.57 X daily periodic rate of .074630 (27.24% APR/365) X 30 days in the billing cycle = about $50.57 finance charge.

There. Now that I am totally confused perhaps one of the real experts will make it more clear. LOL

You can also see @Anonymous brutal high interest can be if you carry a balance forward each month. If I have done my calculations correctly your finance charge on a balance of $1,097.57 @Anonymous.24% is roughly the same as my finance charge on a balance of $7,012.75 @7.90%.

(Please be kind to me if I've totally messed this up. Math was absolutely my worst subject in school).

Re: Question about interest rates

Anonymous — Thu, 06 Aug 2009 05:05:17 GMT

@Anonymous wrote:
the end result you are charged 1/12% of daily average balance for the cycle

compounded daily which it's recomending people large balance pay weekly

rate /365 daily periodic rate

Huh?

Re: Question about interest rates

Anonymous — Thu, 06 Aug 2009 11:06:29 GMT

The daily periodic rate is <INTEREST RATE> divided by 365 days. Therefore if you have a 27.74% APR your daily periodic rate is:

27.24 divided by 365 equals .000746. .000746 is your daily periodic rate on this card.

Daily average balance means the CCC takes every day in your billing cycle, take the balance for each day and add them together. Then they multiply the total of daily balances by the daily periodic rate.

Example: Lets say your balance is $1,079.57 on the first day of this billing cycle. And you make no additional purchases. Let's also say there are 30 days in this billing cycle.

Therefore $1,079.57 added together 30 times (the balance for each day) multiplied by .000746 daily periodic rate means you will be charged $24.16 interest.

The reason CCC's use daily periodic rate and daily average balance is that CC's are subject to fluctuate any given day because they are revolving credit. Unlike an auto or home loan which has a fixed loan amount and fixed payment amount, CC's tend to have changing values due to purchases, credits and payments. Thus in order to properly charge you for interest, they must calculate on a daily basis rather than monthly. You get charged monthly, but it is calculated against daily average balances.

Re: Question about interest rates

Anonymous — Thu, 06 Aug 2009 13:02:59 GMT

------------------------------------------------------------------------------------------------------------------------------------------------------------------

nadial88 wrote: My question is what is the interest calculated from? The balance?

I'm sorry this is such a basic question but i've bended my mind all day researching and I'd rather take the easy route and just look for a direct answer.

Should I call chase and ask them to lower my APR?

------------------------------------------------------------------------------------------------------------------------------------------------------------------

A basic question it is not, so don't be sorry...the lenders have teams of accountants manipulating these numbers to the lenders' best advantage, and teams of lawyers wording the terms of cc agreements to bleed you as much as possible without breaking the law.

The lender makes a note of your balance at the end of each day and applies an interest rate to that balance equal to their stated APR divided by 365 days in the year.

If you are trying to figure out how much your next bill will be (with the added interest), here's the simple answer...

The account's interest rate divided by 1200 multiplied by the highest balance for the month.

Using your Chase Amazon figures, your next statement would show the following interest charge:

27.24 divided by 1200 times 1079.57 equals $24.51. Add this interest to your ending balance for an estimate of what your new balance will be (in this example, it will be $1104.08). It will ~~never~~ almost never be more than this total, and may be less than this total, depending on the timing and amount of purchases and payments made during that billing period and the number of days in that billing month.

If you had used your Tony Soprano "Vig Preferred Platinum" Credit Card at an APR of only 365.00%, your interest on that same $1079.57 balance would be $328.37, and your new balance would be $1407.94.

On the other hand, if you had used your Little People, Big World "Tiny Interest Titanium" Card at 6% APR, your interest would be $5.40, and your new balance would be $1084.97.

I don't do the math any further than that for day to day stuff. I just need to know what I'll end up owing at the end of the month on those ocassions when I know I'll be carrying a balance.

If you can get Chase to lower your interest rate (Good Luck!) to say 17.24% APR, you'd owe $15.51 in interest on that $1079.57 for a new balance of $1095.08

Of course, we can get into special balance segments, two cycle billing, grace periods and transaction fees too...but I think we'll just leave it here. It's confusing enough as it is.

Hope this helped.

(Edit to strike "never"... )

Carry on...

Message Edited by Uborrow-Upay on 08-06-2009 09:02 AM

Re: Question about interest rates

MarineVietVet — Thu, 06 Aug 2009 15:30:24 GMT

27.24 divided by 365 equals .000746.

You need to figure that again. 27.24/365 = .074630. The daily rate from my BoA statement @ 7.90% is .021644. The daily rate figured on 27.24% cannot possibly be as low as .000746.

Re: Question about interest rates

GregB — Thu, 06 Aug 2009 15:40:48 GMT

0.074630% is correct. So would be using 0.000746 to multiply the average daily balance to get the interest charged in dollars.

To be correct they should have said 27.24%/365=0.07463% OR 0.2724/365=0.0007463

All of my statements show the daily rate in units of percent.

Re: Question about interest rates

MarineVietVet — Thu, 06 Aug 2009 17:51:50 GMT

@GregB wrote:
0.074630% is correct. So would be using 0.000746 to multiply the average daily balance to get the interest charged in dollars.

To be correct they should have said 27.24%/365=0.07463% OR 0.2724/365=0.0007463

All of my statements show the daily rate in units of percent.

To be correct they should have said 27.24%/365=0.07463%

That's exactly what I said in my post,

All I'm saying now is that 27.24 divided by 365 equals .000746. .000746 is your daily periodic rate on this card. is a little less than correct.

Re: Question about interest rates

MarineVietVet — Thu, 06 Aug 2009 19:05:13 GMT

Ok now that I've had my say I'm locking this thread. (And I mean that in the nicest way possible). What do you mean I don't have the authority to do that? RATS!!! What's this world coming to?