interest rates

knuttykitten

Hi, can anyone tell me, cos I'm not too sure - if you're credit card shows an interest rate of 1.167% per month do you just multiply it by 12 to get the APR?

I thought all providers were supposed to follow the same format now but some of my statements show an APR and others show a monthly rate so I don't know whether 14.9% APR is higher or lower than the monthly rate I've mentioned above.

Sos if that seems a bit thick but I just want to pay off the most costly ones first.

canny_yorkshireman_2

its normally higher than 12 times the monthly rate due to the compound nature of debt but am sure one of the number crunches will give you an exact figure

knuttykitten

Ok so I guess that means it's probably a more expensive debt (I failed maths at school, big time!) ta muchly

orainsear

To work out yearly interest from monthly interest you need to take account of compounding:

(1 + rate per month)^12 = (1 + rate per year)

here rate per month is 1.167% (0.01167 in decimal form)

so (1 + 0.01167)^12 = (1 + rate per year)

therefore rate per year = [(1 + 0.01167)^12] - 1

= 0.14938 (decimal form)

= 14.9% (to one decimal place)

knuttykitten

Orainsear, are you making me look daft or what.....What is ^ in maths? I'm not sure I get it...... I think you're saying a monthly interest rate of 1.167% is the same as 14.9% APR though. Thanks for the info, I would like to know what that symbol means so I can figure out my other cards,

thank you

orainsear

knuttykitten wrote:

Orainsear, are you making me look daft or what.....What is ^ in maths? I'm not sure I get it...... I think you're saying a monthly interest rate of 1.167% is the same as 14.9% APR though. Thanks for the info, I would like to know what that symbol means so I can figure out my other cards,

thank you

The ^ simply means 'to the power of' - e.g. 3^2 = 9 (3 squared). (Basically you can use an arrow like this if it's not possible to show superscript text/numerals).

Milarky

Coincidentally, you get to nearly the right answer by your original suggestion of multiplying the monthly interest rate by 12 but then adding 1 percent

For instance 1.167% x 12 = 14.004% Add 1% and get 15.004% (true figure is 14.938%)

1.242% gives 15.904% 'estimated' and 15.965% 'exact'

1.385% gives 17.62% 'estimated' and 17.946% 'exact'


[These rates are pretty commonplace on cards these days but the aproximation is starting to become inaccurate at the highest of the three]

knuttykitten

you spotted it, I'm mathematically challenged so ta for making it a bit simpler for me

simtan_2

You can use google-
type:
(1.01167^12 - 1)*100

where the monthly rate (expressed as a decimal) has been added to 1,
so 1.6% monthly would be 1.016

hit search and it calculates the APR!

Sim