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# Working out Interest and APR to pay off cards?

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Posts: 358 Forumite
Hello this may be a bit of a silly question but im trying to get a handle on credit card interest and APR

I have a vanquis card and the APR is 39.94% so does this mean that for my minimum payment back each month is 39.94 Divided by 12?

I want to try and work out an estimate i need to pay back each month ahead of time.

As I also have a cap one cart which is 2.53% interest per month but I know the APR is 30.34% on that.

• Posts: 2,639 Forumite
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that would give you the interest you pay that month, which may not be the same as the minimum payment.

minimum payment depends on the card, for some its a % of the balance, others it may just be the interests, and others could be interest + %

usually the minimum payment will at least cover the interest
• Posts: 358 Forumite
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I was just on the phone to both and got confused.

so here are some real working numbers.

I owe of 1698.49 and a limit of 2500,
they have said my Annual is 39.94%, Perches 41.21% and Cash 34.08%.

each month I pay but I want to clear this dept soon as. which means paying over the minimum.
• Posts: 539 Forumite
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asoe209 wrote: »
Hello this may be a bit of a silly question but im trying to get a handle on credit card interest and APR

I have a vanquis card and the APR is 39.94% so does this mean that for my minimum payment back each month is 39.94 Divided by 12?

Not quite. The APR is calculated assuming the interest is added to the credit card balance, and compounded (so it assumes you pay interest on interest). You actually want to calculate (1.3994)^(1/12) (i.e. the twelfth root). Which gives a monthly interest rate of around 2.84% of the current balance. Actually, it might be slightly different each month due to days of month etc. variations.

39.94%/12 is higher at 3.33%. So there's no harm in using this figure in your estimates, especially if it's easier to follow. Just be aware that's why you are overestimating.
I want to try and work out an estimate i need to pay back each month ahead of time.

As I also have a cap one cart which is 2.53% interest per month but I know the APR is 30.34% on that.
Similarly, 2.53% per month compounded is 1.0253^12=1.0253*1.0253*...*1.0253=1.3496, so about 35% APR.
• Posts: 358 Forumite
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• Posts: 539 Forumite
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asoe209 wrote: »

No. I didn't want to over-simplify. In short - the APR is calculated assuming interest is charged on interest. So dividing by twelve gives an interest rate slightly higher than the actual monthly rate.

Don't worry about this, just be aware that dividing by twelve means you are overestimating the rate a little bit.

As I understand it, you have two cards. The Vanquis has the higher interest rate (of about 40%), capital one is about 30%.

Both are very expensive debts. If I was you, I'd pay the minimum payment on Capital One each month (whatever that is). Then you should aim to pay as much above the minimum payment as you can each month on the Vanquis.

As the debt decreases, more of your money will be going towards paying off the debt, rather than paying the interest.
• Posts: 0 Newbie
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asoe209 wrote: »
each month I pay but I want to clear this debt soon as. which means paying over the minimum.

Assuming you will be paying the same amount each month, you can find out how long it will take, and how much interest you will pay, by running it through the Snowball Calculator.

By changing the amount you put in the box marked "Including your minimum debt repayments, how much per month do you want to spend on servicing your debt?", you can see how increasing or decreasing the payment, affects the repayment period and interest.

For example, if you paid £100 per month (and assuming you didn't spend on the card again), it would take you 25 months to pay it off, and cost you £716.

However, if you instead paid £150 per month, it would take 14 months, and cost you £377 in interest.

£200 per month would clear it in 10 months, with £250 interest.
• Posts: 358 Forumite
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Does that just come up on a Google search? snowball calculator.

Well im trying to see if I can get my vanquice transferred to my capital one. but as I only have 300 available there were being difficult. there now saying they will have to check my account over and well be writing to be with in 7 days to see if they will increase my limit.
• Posts: 0 Newbie
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asoe209 wrote: »
Does that just come up on a Google search? snowball calculator.

It's here.

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