how much interest on 34%?

scrubmuncher

This is a basic question, but one I can't get my head around, so please help if you can.
I have a Vanquis credit card, with an interes5 rate of 34%, but I can't seem to digest how interest is worked out. So if I give an exmple can you answer it so I can get an idea for my understanding.
Say I have used 300pounds on my card, my minimum payment is 5pounds, so I pay this amount so I am 295pounds carried over till next month how much interest will there be on that 295pounds next month.
Also, if I have used 300pounds on my card, my statement comes in on 6th and my payment due date is 21st, I pay that off by 15th, and than on 16th put another 260pounds on my card, how much interest will i get or will it be shown I have cleared the balance once and so......................?
Also if I buy something for 300pounds with the intention of clearing the dept at 100pounds per month over 3 months, how much interest will I be charged each month, month 2 being 200pounds and month 3 being 100pounds.
basic explanation thanks.

CLAPTON

the interest is charged from the day you make the pruchase to the day you pay it off
unless of course you pay in full each and every month when no charge is made

so best to pay in full each month then there is no interest


so to answer your question we need to know which actual date you made each purchase and the date you made each payment and the date of each statement

but approximately

if you buy something for 300
and pay say 100 off when required and
the pay 200 off the following month

you will pay approximately

100 x 34% /12 (i.e. one month of 100) plus
200 x 34% /12 x 2(months) i.e. 2 months of 200

so £2.8 plus £11.3 = £14.1

but really one needs to know the details of every transaction

scrubmuncher

Thankyou, so the statement date is really irrelevant? As long as a payment is made by then.
So I don't need to wait until the start of my next month to use the card. The interest is made from the purchase date, not the statement date and min payment date?

bengal-stripe

At 34% interest, you pay for every £100 outstanding, almost 10 pence interest per day. Interest is charged for every day of the outstanding balance (if you don't settle in full).

scrubmuncher

Oh, ok, that makes better understanding for me. 100pounds, 10p per day, 200pounds 20p per day, 300pounds 30p per day etc...........
And as soon as the full amount is cleared the interest on that money stops, no matter what time of the month it is?

chattychappy

scrubmuncher wrote: »

so the statement date is really irrelevant?

scrubmuncher wrote: »

And as soon as the full amount is cleared the interest on that money stops, no matter what time of the month it is?

Yes. Statement dates and due-by dates are irrelevant if you don't clear the balance in full. Interest runs daily. Pay off as much as you can as soon as you can. You can make more than one payment in a month.

These dates are only relevant to the extent you must pay the full balance as at the statement date by the due-by date in order for the interest not to be applied. And if you are not doing this, then you must pay at least the minimum shown by the due-by date to avoid late charges etc.

scrubmuncher

Thankyou very much, I am amazed credit card companies make big money with such a low collection of 10p per day per 100pounds, and 34% is quite high.
reasured I can use it over a few months to buy an expensive item.
thanks again.

HappyMJ

scrubmuncher wrote: »

Thankyou very much, I am amazed credit card companies make big money with such a low collection of 10p per day per 100pounds, and 34% is quite high.
reasured I can use it over a few months to buy an expensive item.
thanks again.

They pay about 1% per year on the money that investors have invested into the credit card company. On a £1 million bond they might pay £10,000 to the investors. They might write about 2% of debts off each year as uncollectable (£20,000). They might pay about 2% in administration (£20,000). But they charge 34%. (£340,000). The profit is £290,000 per year.

[Deleted User]

Hi,

another rough calculation is:

if you owe £100 and only pay the minimum, say £5, you are only paying about £2.20 off the balance, because about £2.80 will be taken in interest.

YorkshireBoy

scrubmuncher wrote: »

I am amazed credit card companies make big money with such a low collection of 10p per day per 100pounds, and 34% is quite high.
reasured I can use it over a few months to buy an expensive item.
thanks again.

It seems like you're lulling yourself into a false sense of security and contentment.

34% is VERY high. Indeed, it's 14 times the interest rate you'll earn on savings after tax in a high interest account!

Now can you see where the profit comes from?

CLAPTON

scrubmuncher wrote: »

Thankyou very much, I am amazed credit card companies make big money with such a low collection of 10p per day per 100pounds, and 34% is quite high.
reasured I can use it over a few months to buy an expensive item.
thanks again.

bad idea

think of it as a debit card with some other benefits and pay in full each month preferrably by DD.

easy to get into the idea the interest isn't much, run up a bill then something else crops up and that gets added too and soon you are struggling to pay the minimum let alone the whole balance.

save for things you want and pay the bill in full each month