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calculating trailing / residual interest / payoff - how?

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expatCanuck
Super Contributor

calculating trailing / residual interest / payoff - how?

My credit card company is unable or unwilling to tell me how it calculates trailing/residual interest.  I understand the concept in general, but am struggling to find specifics.

 

Might anyone be able to provide an Excel template (or link), or know of a good online article or text on how to calculate residual interest?

 

The entire goal here, of course, is to have the card report zero.

 

Thanks.


2025 Goal: save 3 months' net income

Starting FICO8: 666 (give or take a FICO)
[ Last INQ 12-Feb-2024 ]
EQ8502 INQ (Auto, Mort)7y4m
EX8506 INQ (2 CC, 2 mort, 2 auto)7y
TU8501 INQ (CC)6y8m
3/241/12AoYA 10m | AoOA 24y2m~1%

Yeah, FICO 9 is 850 as well. Smiley Happy
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2 REPLIES 2
Kforce
Valued Contributor

Re: calculating trailing / residual interest / payoff - how?

To illustrate how residual interest works, if you charge $500 in September which has the statement date as September 30, and you do not get a bill until, say, October 7, after the start of the October billing cycle. You then pay $450, which the issuer receives and credits on October 10. You then on October 15 charge another $200. Your total daily balance for the October billing cycle (closing on October 31st), is calculated thus:

 

Oct. 10/1  --> 10/10  (10 days @ $500)=$5,000
Oct. 10/10 --> 10/15  (5 days @ $50)  =$250
Oct. 10/15 --> 10/31  (16 days @$250) =$4,000
Total Daily Balance: $9,250
 

This "Total Daily Balance" is then divided by the number of days in the current billing cycle (31 for Oct), yielding an average daily balance of (9,250.00/31) = 298.39, to which the finance charge is applied. Let say "18.25%" compounded daily .

(0.1825/365)= daily interest = 0.0005
(Daily Interest * average daily balance * days in cycle = total interest due
(0.0005*298.39*31) = $4.63 interest for October.

 

As you can see, the numbers change daily and depend on when money is received, credited, and items charged.

Message 2 of 3
expatCanuck
Super Contributor

Re: calculating trailing / residual interest / payoff - how?

Perfect. Thanks kindly.

2025 Goal: save 3 months' net income

Starting FICO8: 666 (give or take a FICO)
[ Last INQ 12-Feb-2024 ]
EQ8502 INQ (Auto, Mort)7y4m
EX8506 INQ (2 CC, 2 mort, 2 auto)7y
TU8501 INQ (CC)6y8m
3/241/12AoYA 10m | AoOA 24y2m~1%

Yeah, FICO 9 is 850 as well. Smiley Happy
Message 3 of 3
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