Amex APR/interest

Bedazzled_2

Hello
Can someone help with the following query? I recently took out a balance transfer with AmEx at 5.9% for the life of the transfer. The interest I am being charged seems a bit high on my statement it says the monthly rate for BT’s is 1.02% is this correct? How do you work out what is the correct monthly interest rate for an APR of 5.9% (maths is not my strong point!)
I have spoken to their customer services a number of times I was told the monthly rate should be 0.48% but despite my requests they have not changed it. Can anyone tell me if they have had the same problem, what the monthly rate should be or how to work it out?
Many thanks

grumbler

Yes, for 4.9% APR monthly rate is (1+0.059)^(1/12)-1=0.0048=0.48%

Monthly rate 1.02% equals to (1+0.0102)^12-1=0.1295=12.95% APR

Bedazzled_2

Any chance you could explain the equation or point me to somewhere on the web that can? As I would like to understand this, thanks anyway.

grumbler

Let's, for example, initial balance is £100 and monthly rate is 1% (0.01).

After 1 month debt is £100+£100*1%=£100*(1+0.01)
After the 2nd month: £100(1+0.01)(1+0.01)=£100(1+0.01)^2
.....
After 12 months: £100(1+0.01)^12=£100(1+APR/100)

Hence 1+APR/100=(1+0.01)^12 or APR/100=(1+0.01)^12-1=0.1268; APR=12.68%

And vice-versa: 1+0.01=(1+APR/100)^(1/12); 1%=0.01=(1+APR/100)^(1/12)-1; (1+12.68/100)^(1/12)-1=0.01.