Calculating monthly credit card interest

peter999

How do you calculate or estimate monthly credit card interest on balance of £1000 ?


Looking at some of my credit cards, they give interest rates as:

1.4566% Monthly Rate on card purchases (MBNA card)
19.9% Annual Rate for purchases (Barclaycard)

Is it simply monthly interest rate multiplied by balance ?

Do you just divide Annual Rate by 12 to get monthly rate ?

indian_summer

Yes your right
The monthly cost for a balance of £1000 would be £14.56
The yearly cost would be £199.00 at the rates you have stated

grumbler

peter999 wrote: »

Is it simply monthly interest rate multiplied by balance ?

Yes, if the balance remains the same. Otherwise it's calculated on daily basis.

Do you just divide Annual Rate by 12 to get monthly rate ?

Approximately - ignoring compounding.

The exact Excel formula is =(1+19.9%)^(1/12)-1.

Online calculator - APR converter

peter999

grumbler wrote: »

The exact Excel formula is =(1+19.9%)^(1/12)-1.

What is this formula ?

Is that ((1+19.9%) to power of (1/12) ) -1

I assume -1 is not part of 1/12.

grumbler

peter999 wrote: »

What is this formula ?

Is that ((1+19.9%) to power of (1/12) ) -1

Yes - to power of (1/12)

I assume -1 is not part of 1/12.

Yes - as per the standard order of operations.

The result has to be multiplied by 100 if you want % (or formatted as % in Excel):

0.01524*100=1.524%

juicylou32

Great thanks, this has always confused me.