Quick interest question!!!

[Anonymous]

Ok have a first premier card (I know really bad with fees but it's building my credit for now) have a secured card with cap1 also btw. So anyways it has a interest rate of 59.9%.. Is that monthly or annually? So if my balance is $100 owed and I pay $50 I would owe $109.90 next month (59.09 in interest)? Very confused? Any help?

[Anonymous]

WHAT?!  

Is that even LEGAL???

APR is always annual...hence the A but seriously, are you sure?  59.9%??????

[trumpet-205]

APR is annual, however, interest is calculated on daily basis. So you should look for daily interest rate in your disclosure. Also take into account of minimum interest charge.

Highly suggest you stop using your First Premier card and transfer those balance on to Capital One.

[Anonymous]

Your 59.9% is the annual percentage rate (APR)

It was common, though I don't know if the CARD act changed it, for companies to maximize the APR with rounding.

59.944444% can be advertised as 59.9%

To figure out interest charged monthly you have to convert to APY.

If they are compounding monthly 59.944% APR would be 79.49% APY or 6.624% monthly.

If they are compounding daily 59.944% APR would be 82.02% APY or .2247% daily, with the daily interest added to the balance.

There are also several different ways to calculate the finance charge. Avg Daily Balance, Ending Balance, Previous Balance.

For simplicity I'll use ending balance, but most common is average daily balance.

So, to answer your question... Assuming monthly compounding, and ending balance method.

If you had a $100 balance and payed $50 your finance charge would be 50 * .06624 (6.624%) = $3.31

And you would owe them 53.31

But again, they're probably using average daily balance and compounding daily.

[creditguy-378]

it's yearly and you have to also add in the monthly fees and AF If you are going to keep the FP card i would just buy like a lunch like one time a month on it and PIF that way it doesn't matter if the iterest rate is 500%( like some payday loans are) remember 59.9% of 0 is still 0

[MarineVietVet]

The only way you'll know for sure how FP calculates interest is to read the information provided on your monthly statement. It can get somewhat complicated to figure out (at least for my non-math leaning brain) but you can run the numbers yourself.

All of my cards accrue interest daily but FP might be different.

But I will agree that the best tactic is to always pay balances in full before the due date to avoid any interest.

From a BK years ago to:
EX - 3/11 pulled by lender- 835, EQ - 2/11-816, TU - 2/11-782

"Some people spend an entire lifetime wondering if they've made a difference. The Marines don't have that problem".

[DI]

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@Anonymous wrote:
Ok have a first premier card (I know really bad with fees but it's building my credit for now) have a secured card with cap1 also btw. So anyways it has a interest rate of 59.9%.. Is that monthly or annually? So if my balance is $100 owed and I pay $50 I would owe $109.90 next month (59.09 in interest)? Very confused? Any help?

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My goodness gracious as some may say!!  With an APR that high, I see why the poor stay poor. 

[Anonymous]

thanks everyone for your answers. I understand it a little better now lol but one more thing, if its only $4 a month in intrest why is it a big deal? maybe for higher limit card I supose?

[Anonymous]

Your making them money already through transaction fees and then on top of that they charge you a monthly fee and interest fees that are that high. My best interest rate is 9.99 fixed on a credit card. Normal is anywhere from 15-30Ish.    Thats definitely an outlier. If all thats not a big deal to you then go ahead and stay with FP and enjoy.

[Walt_K]

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@Anonymous wrote:

thanks everyone for your answers. I understand it a little better now lol but one more thing, if its only $4 a month in intrest why is it a big deal? maybe for higher limit card I supose?

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One way I started looking at this to get my spending in check is that I will spend significant time when I am purchasing something shopping around making sure I am getting the best deal.  But then I was buying things on my credit cards and carrying balances.  What's the point of making sure I save a couple bucks buying it on Amazon if I'm going to carry balances all the time and fork out interest payments every month.