Credit Card Interest..

[Jesus Pimp]

I've always paid my credit card bill in full and on time, but this month will be the first time I don't pay it in full since I don't have a job. So I will be paying it off in installments. How does the interest work? Do you get interest if you pay the minimum or half the balance for example?

[platypus]

You are charged interest on the unpaid balance.

[rogue49]

Just make sure that you are at least paying the minimum.
Or they start adding on fees for lateness,
or if you are close to the max, don't let it go over,
there are fees on that too.

[zf0enix]

I believe interest is calculated on the average daily balance for the period. Paying the minimum may cause your balance to actually increase slightly, depending on your balance and rate.

Whenever I've had to carry a balance, I usually transfer to a new card which offers a 0% intraductory rate on balance transfers. Then I can pay it off quickly without shelling out extra cash on interest.

If you've regularly paid your balance, you've already learned the best credit strategy. Outstanding balances are a tool of the devil!

[hurting_vlasic]

Yeah, be careful with outstanding balances (and stupid girlfriends who suck you dry like a leech). I never carried a balance, probably for 2 years. Then one month, after stupidly moving in with a girlfriend (Never do that, either, by the way, unless you're really damn sure you want to), I left a balance on there from buying crap for the apartment because we were both broke. I thought I'd pay it off in a month or two, no big deal. Well, that was 1999, and now I have a $7500 balance that I can't get rid of, paying $100 a month in interest. So get rid of that balance as soon as you can, or your credit card company will own you forever.

[clockworkgreen]

I did what was mentioned earlier. Every time I had a card running out of the intro 0%, I'd go out and get a new card with that 0% rate. Fortunately, I never had a very large balance. (and then you'll end up with lots of cards with no balance that will be a pain in the ass to cancel.)

Tonight, I just did a balance transfer from one card to another when I noticed my 0% ran out. Transferring to the new card using the 0% on transfers will cost about $25, but after that, I don't have to worry about interest until November. Keep an eye out for cards with 0% on transfers, and for a small fee, you should be able to go back and forth between cards and not get hammered with interest. At least that's how it's working out for me.

[edmos1]

however you do want to keep to a normal amount of cards by closing unused ones. Otherwise your credit can be adversly affected by too much credit. These things stay on your credit report for 7 years, and are difficult to get off, believe me I have worked for about 6 months to get them off, and still have troubles.

[gonadman]

Originally posted by edmos1
however you do want to keep to a normal amount of cards by closing unused ones. Otherwise your credit can be adversly affected by too much credit. These things stay on your credit report for 7 years, and are difficult to get off, believe me I have worked for about 6 months to get them off, and still have troubles.

Absolutely. Lenders will be less apt to lend you money if you have a large amount of unused credit. On the other hand, by paying in timely installed payments rather than paying off the entire balance all the time, you will improve your credit score.

[zf0enix]

Originally posted by edmos1
however you do want to keep to a normal amount of cards by closing unused ones. Otherwise your credit can be adversly affected by too much credit. These things stay on your credit report for 7 years, and are difficult to get off, believe me I have worked for about 6 months to get them off, and still have troubles.

Agreed. I close my cards after the balances have transfered. Then I call my bank to run a credit check after a while. I try to keep 2 active cards, one has a milage plan that I pay the balance off and the other is the "consolidated" card (if necessary).

[splck]

The only thing I would tell you is be very careful to not charge more than you can afford. Too many people are paying ridiculous interest rates for shit they really don't need and can't afford.

[james t kirk]

woo,

I know from experience exactly how it works.

Once you go into interest rate mode, you pay interest on EVERYTHING you buy from that point on, until such time as you have a 0 balance for 24 hours.

In other words, say your balance is $1,500 and you make a payment of $500.00 before your due date. Now you start paying interest on the balance owing of $1,000.00.

Here's the good part......

Say you buy $250.00 worth of stuff this month.

You now pay interest on the original $1,000 owing, PLUS the $250 you put on this month as well.

Everything you buy is charged interest.

Now, even if you pay off that remaining $1,000.00 from the previous month, you will still be charged interest on everything you buy regardless until such time as you have an absolute 0 balance for 24 hours.

To get out of interest mode you have to phone the bank and ask, "As of right this second, what is my outstanding balance on this card?"

Then you have to pay everything, and not use your card for at least 24 hours.

I would even recommend calling the bank back the next day after you paid everything off and repeating the question to ensure that there is nothing you bought a couple days prior that was added to your card.

Otherwise, everything you buy will be charged their loan shark rates.

It's some scam eh.

[NoSoup]

Originally posted by gonadman
Absolutely. Lenders will be less apt to lend you money if you have a large amount of unused credit. On the other hand, by paying in timely installed payments rather than paying off the entire balance all the time, you will improve your credit score.

gonadman-

That information is actually incorrect. The Credit Card Company only reports it's information (aka balances) once per month. As far as the credit bureau knows, you are just carrying a balance instead of paying it off each month. (Unless, of course, on the off chance that they report right after you have paid it off)

Keep in mind that the Credit Reporting Agency keeps track of your highest balance that you have had on that particular card, so even if you are paying it off each month, if you are maxing it out each month it will not fare well for you in the long run. I would recommend staying below 60% of your limit.

However, gonadman, you were correct on the timely part. Paying your bills on time is the most important factor in your credit score, although there are a variety of other factors involved.

Well, hope this helped!

[Weston]

Stupid question, I guess.

I want a credit card.

19.5% current regular annual interest rate


Annual interest rate. Does that mean that if I carry a balance for a year I pay 19.5% interest? Or am I deluding myself, and hoping things to be too good to be true?

19.5% per month just seems absurd, though.

I dunno.

[t44]

don't forget that you also pay interest on the interest. that is the difference between a revolving account and a straight interest loan. on a stright interest loan you will pay 10% over 10 years, or however it is set up. with a credit card you have a finance charge every month that you also pay interest on. interest on the interest.

example: you take out a $100 loan at 10%, no matter what you will pay back $110. If you put $100 on a credit card and make a $5 payment that leaves your balance at $95, then you are charged your monthly finance charge of $3, now you are paying interest on $98, not $95. What it means is that at the end of the term you havn't paid $110. Most credit card debt is in the 5k not $100, so at the end of paying this card off you are paying a lot more.

I deal with people all day who will not finance a product on our loan because the rate is over 15%, then say they have a credit card at 8%, etc. Remember a straight loan at 15%-20% will probably cost you less over time than a credit card at even 5% APR.

As for open accounts that are 0% balance hurting you. That is not ALL true. Yes, they want to see activity. But you FICO score, which is what most, or all, loan companies go by is determined in part by your available to used credit. Just make sure you don't have soo much available credit that you can't handle. If the loan companie sees your debt. to income ratio is good, but you could potentially put yourself into a horrible debt. to income if you went on a spending spreee, this will look bad.

[yournamehere]

Cut every one of those evil little fuckers in half and pay off the balance as soon as you can.

Look at it this way - if you charge $5000 at 18% interest (and I'm simplifying the math here), you're going to be charged 1/12th of that 18%, or 1.5%, every month. Credit card companies usually set the minimum payment at between 1.5% to 2.0% of the remaining balance. If you're paying only 1.5% of the balance at that interest rate - guess what - your balance never goes down - in twenty years, you'll still owe $5000.
If your minimum payment is 2%, only 0.5% of it goes to your principal. In other words, you pay $100/month, but your balance only goes down $25. It will take you a whole year to bring your balance down just $300. It will take 16 years and 9 months to pay it off.

And don't be hung up on credit ratings - all they do is inform credit companies how likely you are to become enslaved to their usury.

Get yourself into a good income:debt ratio - that's really what matters.