Barclaycard Instalment plan APR

jt_retro

Hi Folks,

I have a question regarding an "Instalment Plan" that I'm able to available of as part of my Barclaycard.

The product is:

12 Month Plan
4% fee, 0% interest on a £1,000 purchase
12 payments of £86.67 each
Total amount repaid is £1,040 which includes a £40 fee
Equivalent to 7.55% APR on a loan

Given that the total cost is £40, and that there are no other fees, why is the APR 7.55%? I tried opening a secure message via the Barclaycard portal to ask them, but the reply was to phone.

Any advice would be appreciated.

Thanks

JT

[Deleted User]

Because the £40 equates to a 7.55% APR on 1K paid off in equal installments over a year.

jt_retro

But how though? I don't understand where the maths came from, especially given this is a 12 month plan.

Basically, I'm trying to company this instalment plan with a regular personal loan, but the 7.55% APR just doesn't make sense to me.

Thanks

Jami74

jt_retro wrote: »

.

Basically, I'm trying to company this instalment plan with a regular personal loan, but the 7.55% APR just doesn't make sense to me.

I think it's because if you were paying monthly interest of 7.55% APR it would look like this:

Date Regular Payment Capital Interest Balance
Month 1 | £86.67 £80.59 £6.08 £919.41
Month 2 | £86.67 £81.08 £5.59 £838.33
Month 3 | £86.67 £81.57 £5.10 £756.76
Month 4 | £86.67 £82.07 £4.60 £674.69
Month 5 | £86.67 £82.57 £4.10 £592.12
Month 6 | £86.67 £83.07 £3.60 £509.05
Month 7 | £86.67 £83.57 £3.10 £425.48
Month 8 | £86.67 £84.08 £2.59 £341.40
Month 9 | £86.67 £84.59 £2.08 £256.81
Month 10 |£86.67 £85.11 £1.56 £171.70
Month 11 |£86.67 £85.63 £1.04 £86.07
Month 12 |£86.59 £86.07 £0.52 £0.00

[Deleted User]

jt_retro wrote: »

But how though? I don't understand where the maths came from, especially given this is a 12 month plan.

Because an APR is calculated on the decreasing balance over the course of a year, equating to £40.

jt_retro

Wow, APR is really different to what I thought it was.

To take a slight tangent, how would one compare this instalment plan to an eg balance transfer 0% interest for 18 months with 1.9% fee?

To me, I would have said to myself "the instalment plan would cost me £40, and the balance transfer would cost me £19, thus balance transfer is cheaper. 4% vs 1.9% "

But is it as simple as that? Is there an APR for balance transfers?

Thanks

[Deleted User]

You can create an APR equivalent if you want to. But an APR is based on a a year's borrowing so not always a useful guide.

Just compare the actual costs of your borrowing options and go with the cheapest.

jt_retro

Ok, so it's still reasonable, for example on either a personal loan or balance transfer, to simply look at the total payment at the end compared with the amount borrowed.

Would I be missing anything there?

Thanks

[Deleted User]

Yes. Always look at the hard numbers.

Anthorn

jt_retro wrote: »

Ok, so it's still reasonable, for example on either a personal loan or balance transfer, to simply look at the total payment at the end compared with the amount borrowed.

Would I be missing anything there?

Thanks

You could be missing the fact that Barclaycard is out there on its own and sometimes gets a bit wacky: For example I'm in my Barclaycard online account on the Transfers and Offers tab. I have two balance transfer offers; (1) 0% APR for 29 months with a fee of 3.5%; (2) 6.9% APR until paid off in full with a fee of 2.9%; the most limited time available being the 6.9% APR. Now I know which I would choose but I suppose there will be those who will choose the 6.9% APR offer. Where it all falls down though is that Barclaycard sometimes makes an offer without out increasing the credit limit even if the limit is close to being maxed.

Maybe it's all some sort of test lol

jt_retro

Anthorn, thanks for those examples. I'm curious to learn why the fees aren't included in the APR figure. I thought the whole point of the APR was to include fees. I guess though for fixed fees, they can't really give you a % until they know how much you want to borrow....

When you say "whacky", do you mean that people may go for the 6.9% one because they see it has a lower fee and miss the internet free part?

Thanks