Converting APR to % interest per month

[Deleted User]

Is there any easy way to convert this?

For instance, if the APR is 18%, how do I work out how much interest I'd pay in a month on a balance of, say, £1000, for example?

Reason is I've got £1500 balance on a credit card (APR about 18%), and been offered 2.9% balance transfer for 4 months (and then to 18%) from another card. Just trying to work out if its worth doing or not (since there'll be a 3% balance transfer fee.

Maelstrom_2

You'd be looking at about £50 for the BT v £70 for the status quo.

You will save money, but not a great deal - 4 months aint jack really.

Of course it also depends on how fast you pay it off.

CLAPTON

the actual fomula is ...

((1+APR%) raised to power 1/12) -1 )
however dividing by 13 is a good approximation

if you have excel spreadsheet then 18% APR gives

=power(1+18%,1/12)-1 = 1.39% per month
but 18%/13 gives 1.38% per month which is quite close.


If you're paying a 3% BT fee plus 2.9% per month then its just mathematically worth it but in my view its not worth it in practice because you can't usually get the full 4 months and have to wait for transfers to take place.
dont bother.. try to get a 12 month deal instead

[Deleted User]

CLAPTON wrote: »

the actual fomula is ...

((1+APR%) raised to power 1/12) -1 )
however dividing by 13 is a good approximation

if you have excel spreadsheet then 18% APR gives

=power(1+18%,1/12)-1 = 1.39% per month
but 18%/13 gives 1.38% per month which is quite close.


If you're paying a 3% BT fee plus 2.9% per month then its just mathematically worth it but in my view its not worth it in practice because you can't usually get the full 4 months and have to wait for transfers to take place.
dont bother.. try to get a 12 month deal instead

Yeah. I thought there wasnt much in it.

The balance transfer offer comes from one of my existing cards which I've got zero balance on and a huge limit.

I've probably got enough credit cards as it is.

Formula is a bit complicated. maybe I'll just divide by 13.

BTW. Transfer wont take too long cos I've got credit card cheques from them.

sdooley

APR is made up of fees and interest so there is no simple way of translating it.

You can get a rough and ready idea by looking at the cost in pounds.

If you keep the full £1,500 balance outstanding it might be better to switch.

3% x £1,500 = £45
plus £3.75 interest per month (£15) = £60 total

£22.50 interest monthly x 4 months = £90

If you pay it off at £500 per month though, the picture is different. You still pay about £53 with the fee but only £22.50 + £15 + £7.50 = £45 interest on the existing card.

Can you shop around for a better balance transfer deal?