Quick question regarding rates and minimums

Superscrooge

Interest is calculated daily rather than monthly. The statement dates vary slightly month to month and some months have more days then others. Which I believe will explain the slight discrepancy.

If your calculation comes out a few pence different from the minimum payment I wouldn't worry about it.

You could save yourself a lot more money by just clearing the full balance each month.

m4rc

jennyjen wrote: »

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.

Nope you can't work it out like that, that's the annual rate. What I always do is use a site to work out he monthly interest. The sum is really not simple, so go to google and type in 'apr to monthly' and you should find a simple calculator. Put in the APR and it will tell you the monthly rate.

Let's assume it was 24% APR, you would assume it's 2% a month, but it's actually 1.8088 a month. They give you an interest free period, so if you got something and paid for it a few weeks later chances are they wouldn't add interest, so that makes calculating interest and working out payments a little tricker.

Personally I'm a bit sad when it comes to managing my finances, I have this ridiculous spreadsheet that I made, it's taken hundreds of hours to make it work for me, I have sections for adding credit limits, interest rates and more, then each month I track my balances across every and account, savings account, credit card, cash in my pocket and more.

Each day I know what is coming out of an account, money due in, bills I need to pay etc. I track all expenses, so I know what I will have in each account way ahead of time. I used to be terrible with money, and my partner was worse, I tried everything but this is the only thing that worked, so I've stuck with it, and now I'm fully in control of my finances and can afford things I never could have before without any risk of missing payments or getting into financial difficulties.

I theory I have a pretty good idea of what my balance will be for each credit card each month, usually within a few pence. I would never again pay a minimum payment or even close so that kind of doesn't matter to me, so I don't work it out. Instead I make sure I clear every card as quickly as I can so I'm paying the minimum interest, and I work out the best way to pay the least - you have to juggle, pay the card that will cost more quicker than a 0% card for example.

Any interest free deals I will pay when I would have to pay interest so I get the best deal, I still don't pay the minimum payments until then though as if something went wrong and I suddenly couldn't afford to clear an account it could cost a fortune.

I track when statements are due, I make sure card companies send me paper copies, my internet is really bad where I live (very rural) so I don't rely on being able to see them on a screen. I do log on and check when the statement is due, generally I find if they say it's due to be produced on the 5th I can see it on the 6th so I don't bother checking early. I check I've worked out the right balance, I check for any errors, I check the interest rate is as expected and see if they are offering me any deals, and I make a note of the payment due date and the minimum payment. Some cards you will pay on the same dated every month, some will slowly drift earlier and earlier in the month as they do it on a 28 day cycle, so never assume you know when a payment is due, and never assume you know what you need to pay, the balance, or any of it, check it.

So although it's good you want to work it out, I'd say what you need to know is the day you can see the next statement so you can then check your due dates and payment amounts.

For me I then make sure I'm paying as much as I can off each card, I leave payments u til as close to the due date as I dare, never risking missing a payment date of course. No point paying it early if you can keep it a little longer and make your money work harder for you. For me I use the money to pay other bills, I don't have enough savings that interest in a bank would make a difference for a day or two, that would need balances in the tens of thousands if not hundreds I'd guess (without working it out, I'll probably be corrected soon!)

If I can make a suggestion, don't even consider the minimum payments. It's a really unhealthy way of paying your debts, you will find you barely make a dent in the amount you owe, it will take years to pay it off and just leaves you so open to risk. If you can't afford to have cleared the balance of a purchase within a year then I'd suggest you can't afford to buy it. Some will say you should clear it sooner than that. Interest free purchases are different, but anything that will incur interest that isn't fixed term I would want to be cleared in a few months or so.

So sorry here isn't an easy way to calculate he minimum payments each month for any debts, your best answer will be to use the statements as that's why they produce them, and make sure you plan your finances and budget to clear your debts. If you do you shouldn't have any financial issues and your credit limits will increase and interest rates fall.

Good luck