I'm an idiot - please help (Vanquis)

rachymoo

We were struggling for money and I very stupidly got a Vanquis card. My limit was eventually increased to £1,000 and the card is now up to that limit. This month it was just a few pounds under the limit, then today my statement has come in and all of a sudden it’s £1,074 (so now over the limit).

I realise I am completely stupid for taking a card when I don’t even know how the interest rates work – believe me, I feel like a complete idiot, the card is being cut up and I am doing whatever I can to pay it off as quickly as possible.

At the risk of sounding even dumber please can someone talk me through how the interest is calculated – I just cant get my head around it, I have trouble understanding. How has £74 been added on? (I’m not saying it’s wrong, I know it’s right I’m just trying to understand how it’s all calculated so I don’t get any more nasty surprises). If I pay £200 off the card this month and don’t spend any more on it then my minimum payment next month will be less wont it? (I’m planning on paying more than the minimum but I still just want to check).

Thanks in advance – please don’t flame me, I am really trying to get this sorted and my next stop will be the DFW board

stephane_2

The amount of interest you pay each months will depends on different factors, the apr set in your agreement, what you've done with the card, is it only purchases? If you've taken cash out then the interest will be much higher. If your balance was just under £1000 and lets imagine you have an annual interest of about 69% which is very likely then the £1074 sounds right to me and they've probably added an over limit fee on top of that. You need to bring the balance well below the £1000 if you don't want to have more charges added.

rachymoo

No I’ve never withdrawn cash with it, only purchases (some were paypal payments – does that make a difference?).

I will have an extra £200 when I’m paid later this month so that is going straight on the Vanquis card – plus £50 which I had already budgeted to pay towards it. So that should help, shouldn’t it?

YorkshireBoy

Your statement will contain an 'estimated interest next month' figure, but this is based on 2 key elements:

1. That you make no further purchases, and

2. You make the minimum payment on the due date.

But back to basics, you accrue interest each day at the rate of:

Closing balance x annual non-compounded rate(%) / 365

...where the annual non-compounded rate (ANCR) is 12 x your monthly rate.

The interest added to the account is then the sum of 30 (or so) of these days' interest figures.

However, you may find it easier (although not quite as accurate) to use your APR figure instead of working out the ANCR.

stephane_2

If you pay £250 this month then yes it will help and you will start also paying less interest the more you pay towards the balance.