Nationwide Credit Card: Payment calculation

landsker

The Nationwide seem to be on their own in calculating interest and repayments on their credit cards!
The terms are that each monthly payment consists of the interest (+ late fees if any) plus 1% of the balance. (Minimum of £25 per month)
No calculator on the net can accept this odd combination, neither will Nationwide do a "what if" sum for me.
The APR on the card is 15.9% and I'm trying to see what the initial payments would be if I bought an item for £1800, just to see if my budget will be OK on the minimum payment, but with the hope of making extra payments on-line as and when.
At a rough guess, an APR of 15.9% could be expressed as 1.235% per month, so that might mean an initial amount of interest of £ 23.85, plus 1% of £1800, ie a total of £41.85.
Does this make sense or am I too simplistic ?

Cell

This suggests that the monthly interest rate is 1.2372%

http://www.stoozing.com/mon2yr.htm

Use MBNA on this link to see how long it would take to repay the debt at the minimum. Theirs is the same interest plus 1% calculation.

http://www.moneysavingexpert.com/cards/minimum-repayments-credit-card#calc

Over a period of time the minimum would drop as the principal slowly shrinks, but to all intents and purposes your calculation is correct.

chattychappy

Monthly interest would actually be 1.2372%

Assume purchase on Jan 1st, with statements at the beginning of the month and you get until the end of the month to pay. (And you pay on the last day.)


1st Feb statement
Balance = £1800.00
Minimum = zero interest + 1% x £1800 = £18.00
£25 minimum... so you must pay that.
(no interest yet - you might still pay the balance in full!)

1st Mar statement
Statement would show interest of:
1.2372% x £1800 = £22.72 for Jan
(appears on the statement, you didn't pay the Feb statement in full)
1.2372% x £1800 = £22.72 for Feb*
Total interest = £45.44
Balance before interest = £1800 - £25 = £1775.00
Add interest £45.44, New balance is £1820.44
Minimum = £45.44 + 1% x £1820.44 = £63.64

1st Apr statement
Interest would be 1.2372% x £1820.44 = £22.52
Balance before interest = £1820.44 - £63.64 = £1756.80
Add interest £22.52, New balance is £1779.32
Minimum = £22.52 + 1% x £1779.32 = £40.31

1st May statement
Interest would be 1.2372% x £1779.32 = £22.01
Balance before interest = £1779.32 - £40.31 = £1739.01
Add interest £22.01, New balance is £1761.02
Minimum = £22.01 + 1% x £1767.97 = £39.69

You see that the minimums will settle down to about £40 and decline slowly. But the first couple of statements will be different because the first statement will not show interest (allowing for the possibility that you will pay off in full) and then the second statement will show two months' interest (because you didn't pay off in full).

The actual figures will be different because:
1) you probably won't buy the item at the start of a statement cycle
2) you won't get 30 days to pay and won't leave it to the last moment to pay

The figures I show are therefore effectively "worst case" in terms of minimums/interest.

[* I have assumed no compounding for this month as the interest was not applied on the previous statement. If they do compound, interest will be 28p more in this month only]

YorkshireBoy

landsker wrote: »

The Nationwide seem to be on their own in calculating interest and repayments on their credit cards!

It's actually one of the more common methods for calculating minimum payments these days.

No calculator on the net can accept this odd combination

This calculator would seem to fit your requirements (of making extra, albeit regular and the same, payments) perfectly...

http://www.stoozing.com/msoc/calcpay.php

I found it on the 'net.

You may also find you can play around with this one...

http://www.whatsthecost.com/creditcard.aspx

landsker

@chattychappy.
Awesome & thanks for your trouble.