What is Standard purchase interest in laymen's terms?

kinny999

Apologies in advance if this is a repost but i did have a quick search and I'm pushed for time so I'll take the risk of submitting a frequent question in light that I'll no doubt forget to post at all.

I have a Capital One CC, it's the 36.9% APR one if that's information that may be of use?

Out of my £1250 limit i have a balance of £100 in debit give or take a few quid.
Next month I plan a £430 purchase using said card, a purchase which I will not be paying off the entire balance within the same month. (not the best way I know but necessary )

On the day after my purchase my balance will be £530 exactly (for ease).

My query is as follows...

Is Standard purchase interest going to add 36.9% of that £430 purchase on top as a "standard purchase interest" charge before the monthly interest is then calculated on the new total balance.
Or,
Will the interest i pay only be calculated on the overall balance of the card (£530) as i understand it?


I hope that makes sense and that someone can clear this up for me as the last thing i want to do is make a £430 purchase only to get hit with a further "purchase interest" charge of £100 or so bumping my balance up by an extra £100 before monthly interest is calculated.

Sincere thanks and one hundred badgers to any helpful souls :D

blitzboy

APR means Annual Percentage rate. So the 36.9% is the annual rate. That divided by 12 (months) is %3.075 so you will pay just over 3% a month until it is paid off. So about £16 a month interest if the balance was £530.

Obviously rough sums as it depends on what day you purchase in relation to the statement date etc but they are somewhere in the area.

rolls99

Take your balance in any month

Divide this by 100

(Example) £500/100 = £5

Multiply this by 36.9 (your APR) £184ish

Then divide by 12 (months in the year/statements)

So, on £500 at that APR it will be £15-16 interest

As you pay the balance down, your interest drops

The APR is an 'annual' figure - so to think of it simply,
divide your 36.9% by 12, which is just about 3.1% per month

Your interest is then around £3, per month, per £100

Remember, what you actually pay in interest depends on what transactions you've made and any promos, etc - but that's a rough and ready idea

redpete

The APR is the amount of interest you would pay if you had the debt for a year. So if you had a balance of £400 that you didn't pay for a year (I know that is not realistic wioth CCs but hay..) then you would be charged £147.60 over the whole year. This rate is charged on the daily balance

Your £530 debt would cost approx £0.56 a day.

You do not get charged 36.9% as a one-off fee on the pourchase.

InsideInsurance

To be pedantic, APR is technically the equivalent interest rate you'd be paying for the total cost of credit over 12 months, normally based on a 1.2k balance as it does also include fees as well as interest. Hence the British Airways Premium card has a 56.4% APR due in part to the 150 annual fee on top of a 19,9% interest rate

jonesMUFCforever

When I first got a credit card many years ago (who remembers the Access card LOL) the standard rate was 26.8% this was the rate if you borrowed year in year out.

StuC75

Wow the most complicated calculation ever.

Interest rates & Apr's are 2 different matters, but as a guide 36% per year / 12 months = 3% per month, so £3 per £100 of the balance. Which because you are carrying a balance month in month out is from the date of transaction.. The exact amount varies by when in the month you spend & pay..

rolls99 wrote: »

Take your balance in any month

Divide this by 100

(Example) £500/100 = £5

Multiply this by 36.9 (your APR) £184ish

Then divide by 12 (months in the year/statements)

So, on £500 at that APR it will be £15-16 interest

As you pay the balance down, your interest drops

The APR is an 'annual' figure - so to think of it simply,
divide your 36.9% by 12, which is just about 3.1% per month

Your interest is then around £3, per month, per £100

Remember, what you actually pay in interest depends on what transactions you've made and any promos, etc - but that's a rough and ready idea

rolls99

StuC75 wrote: »

Wow the most complicated calculation ever.

Interest rates & Apr's are 2 different matters, but as a guide 36% per year / 12 months = 3% per month, so £3 per £100 of the balance. Which because you are carrying a balance month in month out is from the date of transaction.. The exact amount varies by when in the month you spend & pay..

:rotfl:

Indeed it is, that's me LOL :eek:

YorkshireBoy

redpete wrote: »

Your £530 debt would cost approx £0.56 a day.

You're 10p out (approx. £3 a month).

36.9% APR equates to an 'annual non-compounded rate' of 31.87% (which is 12 x the monthly rate of 2.6519%...OP, see your summary box).

So the daily interest accruing is:

£530 x 31.87% / 365 = £0.46 per day

Of course the sum of the 30 days (or whatever's in the statement month) is then applied to your account at the end of the statement period and is then subject to compounding, ie you're charged interest on interest.

kinny999

Cheers for the replies folks.

Badgers all round.

HariboLector

It's also worth pointing out that the interest is calculated daily, not monthly, and will be calculated each day on whatever the balance that day was. There isn't really a monthly rate even - that's also an approximation based on an assumption of all months having 31 days. So you'll pay less interest in February than other months.

Say you had a statement on the 1st of the month showing a balance of £1000. Then on the 15th of the month you bought something for £500. Then on the 20th of the month you paid £1000 off the card. You will have had balances of the following;

£1000 for 15 days
£1500 for 5 days
£500 for the remainder of the month (be it 30 or 31 days).