what is a monthly purchase interest rate?

chickenfeet

Hi, my vanquis card came yesterday, and at the top of the attached letter it states:

Your Credit Limit £500
Your monthly purchase interest rate is 2.000%
Your monthly cash/cheque interest rate is 3.000%

When I was accepted on the phone, I was told my APR would be around 39% and the moment I heard that I stopped listening (shock possibly). He mentioned 3 different figures, but I was just thinking of not using the card at all and keeping it in my wallet.

So, having forgotten my APR, and it isn't in ANY documentation here or in my evanquis online account, and seeing this monthly purchase rate thing, I'm confused about what I'll be paying on my borrowing. I asked my friend who has about 6 CCs and she doesn't know.

Sorry if it's been asked before, I've spent an hour looking on the forum. Thanks..

opinions4u

2% a month = 26.8% APR.

3% a month = 42.8% APR.

Avoid cash transactions and stick to purchases to keep the cost down.

Clear a purchases balance in full every month and pay no interest at all.

There's no need to carry debt on the card.

Jack1888

I'd ring them to clear the issue up. My APR has just been reduced for being "a good customer" :d

Why don't you pat me on the head and give me some candy Vanquis? LMAO!

chickenfeet

Thanks opinions4u for working it out. Could he have told me the wrong APR on the phone I wonder. The first figure he mentioned was 39%, and that's more than 2% right?. I think if they had told me which tier I was on, or actually put it in the documentation they sent then there would be no confusion.

I used to have credit cards a few years ago, and never had a monthly rate mentioned, so that has kind of added to the confused state I'm in. Oh dear, am I fit to be let out without a card, never mind with one? LOL

Fruit_and_Nut_Case

Handy calculator to convert Monthly to Annual rates and vice versa HERE.

chickenfeet

ooh thanks

dresdendave

As mentioned by a previous poster, pay in FULL every month and pay NO interest, in which case the APR is irrelevant.

A card like this should be used to build your credit rating, not to carry an ongoing balance.

thenudeone

chickenfeet wrote: »

The first figure he mentioned was 39%, and that's more than 2% right?

The 2% is a monthly rate. Since interest is added every month, the interest starts to be charged interest, which is why the APR is higher than just 12 x the monthly rate.

The APR is calculated assuming a single starting balance with no repayments (for simplicity)

If you had £100 outstanding on 1st January, the statement on 1st Feb would have £2 interest, leaving a balance of £102 (£100 + 2%) ignoring any repayments

The statement on 1st march would be £102 + 2% of 102 = £104.04

The remaining months would be:
Interest 2.08
01/04/2012 106.12
Interest 2.12
01/05/2012 108.24
Interest 2.16
01/06/2012 110.41
Interest 2.21
01/07/2012 112.62
Interest 2.25
01/08/2012 114.87
Interest 2.30
01/09/2012 117.17
Interest 2.34
01/10/2012 119.51
Interest 2.39
01/11/2012 121.90
Interest 2.44
01/12/2012 124.34
Interest 2.49
01/01/2013 126.82 or 26.82% higher than the starting balance.

Which is why 2% a month equals 26.82% APR

39% APR is about 2.8% a month.

chickenfeet

Right, do most credit cards add interest to interest like this? I've had cards before and managed them ok, but never thought or heard of this.

camuk81

According to what I was advised by Vanquis their systems can't cope with doing it the normal way!

chattychappy

chickenfeet wrote: »

Right, do most credit cards add interest to interest like this? I've had cards before and managed them ok, but never thought or heard of this.

Sure. Credit cards work on a monthly cycle and interest is specified as a monthly rate, applied monthly and effectively merged into the balance carried forward.

Regulation requires them to quote an annual equivalent.