Help needed with EAR interest

bizzyrob

Hi Guys,

My GF and I are going to Australia next year and have paid the deposit on a adventure trip thing. We were going to pay the rest of the balance in December as we could do this comfortably. However we have found out today that the price would be going up by £100 each, unless we managed to pay the full £1000 now.

My question therefore is how much interest would my GF be paying if she paid the £1000 now and went £1000 over her interest free portion of her graduate Abbey Account. The EAR interest is 9.9%?

Does this mean 9.9% of 1000 = £99

Then divided by 12 ( months ) then times by 4 (sept,oct,nov,dec)?

I would then work it out as being £33. In which case it is worth doing! But it sounds to good to be true. Have I got EAR massively wrong!!

Any help will be so welcome.

Cheers

Robbie

YorkshireBoy

You're quite correct that paying now by using the overdraft will be cheaper, but the calculation you've used is not correct (not a long way off, but not 100% accurate).

Plus, anything you can pay into the current account between now and December will save you even more money.

Have a good trip.

Paul_Herring

bizzyrob wrote: »

The EAR interest is 9.9%?

Does this mean 9.9% of 1000 = £99

The A in EAR stand for annual, so if the debt was £1000 for a whole year, then yes, it would be £99.

If it won't be for a whole year however, it will be less.

liam_comer

I Think You Would Divide The 9.9 By 12 (0.825). This Means That There Would Be A Monthly Interest Charge Of 0.825% On The Balance Over Her Interest Free Portion.