Quick question regarding rates and minimums

jennyjen

If I have two credit cards at the same interest rate with different outstanding balances, would it make a difference if I transferred one balance to the other to consolidate the debt, or would the overall amount of interest paid be higher?

Let's say I'm paying £120 on one and £60 on another, both of which is the minimum and a bit extra. If I consolidated them, does still paying £180 altogether keep the debt decreasing at the same speed?

Or am I missing something here?

m4rc

Lets simplify it:

£120 at 10% is £12
£60 at 10% is £6
Total is £180 + £18 = £198

Or

£180 at 10% is £18
Total is £180 + £18 = £198

Avoid minimum payments, always pay as much as you can. One way your money can save you a little interest (although it's not worth it at this level) is if you can pay more now and decrease the payment a little later rather than pay the same for a few months. So if you know you had a debt of £500 and you are going to pay £50 a month, if you can pay say £200 the first month you take a chunk out of the amount they will be adding interest to. It's small amounts but I've helped a friend juggle, his debts were significant and he paid things off quicker and paying less interest by being clever with the amounts here and there.

grumbler

jennyjen wrote: »

...would it make a difference if I transferred one balance to the other to consolidate the debt

It would.
Your debt will get bigger because it costs to transfer the balance.

jennyjen

Ok thanks guys, I've got what I needed to know on that.

I have a second question though ... how do I find out how my card's minimum payment is calculated. It doesn't seem to say on my statements or online accounts.

Online calculators say "2.5% or £5" or "1% plus monthly interest or £5" ... but this is an average guess. How do I find out or calculate what it actually is for me?

bengal-stripe

jennyjen wrote: »

Online calculators say "2.5% or £5" or "1% plus monthly interest or £5" ... but this is an average guess. How do I find out or calculate what it actually is for me?

It is 1% or 2.5% of this month's balance, plus any interest due and (if applicable) any charges. Check which one of your cards charges 1% and which one charges 2.5%. Interest due you'll find on your statement.

As your balance and the interest due will fluctuate from month to month, so will your minimum payment. (Unless the minimum payment is very low, then it will be rounded up to £ 5.00.)

jennyjen

bengal-stripe wrote: »

It is 1% or 2.5% of this month's balance, plus any interest due and (if applicable) any charges. Check which one of your cards charges 1% and which one charges 2.5%. Interest due you'll find on your statement.

As your balance and the interest due will fluctuate from month to month, so will your minimum payment. (Unless the minimum payment is very low, then it will be rounded up to £ 5.00.)

That's what I'm trying to find out. The above were just examples offered by online calculators. I don't actually know what percentage they use for the minimum. Only the actual interest charged, not the calculation used to get there.

When I take the APR as a % of the balance, then divide by 12. Then add this to 1% of the balance, it's close, but not the exact amount charged. Am I doing this wrong?

For example if my balance last month was £1,000
Apr is 20%
Then that's £200 annually and £16.7 a month correct? (£200 divided by 12)

I then add this figure to 1% of £1,000, which is £10.

So the minimum for that month was £26.70?

Only my statement says I was charged some other figure that's close, like £27.03.

I'm probably calculating wrong, but I don't really know how THEY'RE calculating it. I need the percentage to use the online calculators correctly.

bengal-stripe

jennyjen wrote: »

For example if my balance last month was £1,000
Apr is 20%
Then that's £200 annually and £16.7 a month correct? (£200 divided by 12)

Interest is calculated on the daily balance, which will fluctuate throughout the month, presuming the account isn't dormant.

If you want to know your interest down to the last penny, you will have to work it out for every single day. (20% of the daily balance : 365 days). Don't forget, some month are longer than others, also the dates of the statements might vary slightly. One statement might cover 28 days and the next statement might cover 32 days.

If you're so suspicious and believe your CC cheats on you, you have to get calculating the interest for every day if your account has an outstanding balance. Alternatively pay your card in full every month, then no interest will be due.

jennyjen

Ok thanks, I think I'm pretty clear on that, but the crucial thing I want to know is this:

1% or 2.5% of this month's balance

Which is it? If it varies from card to card how do I find out what it is?

If I'm to do an accurate calculation I need to know what percentage of the balance they require me to pay as part of the minimum.

I'm not suspicious, but these online calculators that help you work out how long it will take to pay off a card are predicated on this percentage number for the minimum.

For example here:
http://www.cardcosts.org.uk/

I don't know what to enter right at the bottom for "Minimum payment rules for your card."

Perhaps I'm being myopic and this number is irrelevant.

bengal-stripe

jennyjen wrote: »

1% or 2.5% of this month's balance

Which is it? If it varies from card to card how do I find out what it is?

If I'm to do an accurate calculation I need to know what percentage of the balance they require me to pay as part of the minimum.

You have signed up with a particular card, they will have told you on the form you signed. Look it up on the copy you hold. Furthermore, every monthly statement has a 'Summary Box' listing the conditions of card use. You'll find the information in there:

From a Santander statement: Minimum payment

All default fees, annual or monthly fee (if applicable), payment protection insurance premiums, and interest plus 1% of the remaining balance shown on your statement, plus any arrears payable (subject to a minimum of £ 5.00).

If you can't find it, phone your Credit Cards and ask or look it up on your card's website. Alternatively post here what cards you have and people will look it up for you.

Do you really need your hand held?

jennyjen

bengal-stripe wrote: »

You have signed up with a particular card, they will have told you on the form you signed. Look it up on the copy you hold. Furthermore, every monthly statement has a 'Summary Box' listing the conditions of card use. You'll find the information in there:



If you can't find it, phone your Credit Cards and ask or look it up on your card's website. Alternatively post here what cards you have and people will look it up for you.

Do you really need your hand held?

There's no need to be rude. I said back in my very second post that it was not on the statements. Just needed a bit of clarification whether it was something obvious like "all cards charge 1% of the balance" or if I could easily find out what it was. E.g. "It's usually found here".

You're the one who took it upon yourself to go all round the houses.

Of course I could have rang them, but then it was late and I thought a polite question on a forum would be ok.

grumbler

jennyjen wrote: »

...I said back in my very second post that it was not on the statements...

What CC is it? I am happy to stand corrected, but I am yet to see a statement not showing this information.