How to calculate the "real" interest rate?

[Tiki2]

I have a card with a balance of approx. $16,000 that I am trying to pay off but despite large payments it is barely moving.   I am trying to figure out if this card actually has a higher interest than stated on the bill (interest capitalization??) and if so, how to compute the "real" interest.  The cc company has split the balance into the following 3 categories:

 11.24 ($9500)

16.24 ($3,400)

21.24 (3000)

All of this, however, is compounded daily so that the highest interest has barely moved at all and the middle interest amount has actually RISEN through all of these payments.  I am trying to get the real interest rate to know whether a consolidation loan is worth it to get rid of this card, or at least find out what the real minimum payment should be to decrease all three categories each month until its paid off.  

Hope this isn't too confusing & thanks!

[FicoMike0]

Is the identity of the lender a secret?

I never heard of a three tiered interest rate. What is the min payment? Does the statement disclose how long the payoff is at the min?

I think the answer to your question is, can you get a $16,000 loan at less than 11.24% ?

[Tiki2]

This is a Citi card I've had for a very long time - no lates or cash advances, ever.  The 3 "tiers" were only added in the last year or so, and I did not realize the balance was actually climbing some months.  The minimum payment is always between $330.00 and $375.00 but I always pay more.  

[JoeRockhead]

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@FicoMike0 wrote:

Is the identity of the lender a secret?

I never heard of a three tiered interest rate. What is the min payment? Does the statement disclose how long the payoff is at the min?

I think the answer to your question is, can you get a $16,000 loan at less than 11.24% ?

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It's not all that uncommon for lenders to have different interest rates for different types of spend, or purchases... or even have different tiers for account holders based on their credit profile (synchrony does this). 

As for the OP, there should be a breakdown on your statements as to how they are calculating the interest they're charging.  They could also tell you how they calculate what they're charging interest on such as average daily balance, etc... have you called them to ask?

You could also call them to ask for an interest rate reduction. 

[FicoMike0]

You could also call them to ask for an interest rate reduction. 

@JoeRockhead 

I wish I'd thought of that!

[Tiki2]

I think I will try that.  Thanks!

[Kforce]

Month's interest will depend on which formula institution uses.

Some use real days every month, others average month's days, others 30 day per month.

It also varies depending on 365 day's per year, 360 a year or real days that year.

Interest  =  (Balance * Daily * Days)

 9500 * (0.1124/365) * 31  = 90.69

9500 * (0.1124/360) * 31  =  91.95

To work backwards: "Calc rate from numbers"

 ( ( ( ( Interest Paid / Days_Month ) / Balance ) * Days_Yr ) * 100 ) = Yearly Rate (Not Decimal)

 ( ( ( ( 90.69 / 31 )  / 9500 )  *  365 ) * 100 )= 11.24

PS: Highest Interest paid is with 360 day's year and using real calendar day's each month.

Your interest numbers should be ~(92+48+55) = 195/mo

( ( ( ( 195 / 31 ) / 15900 ) * 360 ) * 100 ) = 14.24  (Average )

[mgood]

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@FicoMike0 wrote:

I think the answer to your question is, can you get a $16,000 loan at less than 11.24% ?

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I like this approach. 

If the answer is no, and Citi won't give you an interest rate reduction,  we're back to square one though.

[Kforce]

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@Tiki2 wrote:

 I did not realize the balance was actually climbing some months.  

Paying $330-$375 or more, you should not see a balance increase on the 16k unless you are using the card and not paying all the extra spend you are putting on the card every month.

The minimum payment is always between $330.00 and $375.00 but I always pay more.  

The minimum payment should be falling every month.

Payment moving $45 equates to an ~$2000 balance shift

Is this card a daily use ?

[zerofire]

Oh dang. That is quite a mess. There is also another thing to consider. Anything you pay that is the minimum will be applied to your lowest APR. Only stuff that is more than the minimum will be added against the highest APR. That middle APR will definitely be expanding like a saucer if you cannot find  a way to pay lots of extra. I recommend a debt consolidation loan if you can get one. I also hope you are not adding charges to this account as there is no grace period and interest on new charges would start immediately.