Credit Card Bills Ė How to Understand
April 19th, 2006
Save Money with
Lower Interest Rates
If you have ever
looked at your credit card bills there is a section usually on the very
end of the bill listing several different interest rates. The interest
rates can add up to a lot of money, and finding ways to lower the
interest rates is one way to reduce debt and eventually eliminate it.
Usually the credit
card company will specify the finance charge for that month in the
bill. The interest rate is directly related to the finance charge. The
interest rate is calculated from separated transactions. Depending on
the current promotions rates on the same card can vary greatly. You
will notice there is breakdown rate for Balance transfers and checks,
Purchases, Cash Advances at ATMís or Banks.
If they list the
daily rate for the interest you will notice the interest rate is broken
down from the larger Annual Percentage Rate (APR). If your company does
not give you a daily rate you can take the listed APR and multiply it by
the current balance and divide by 12 months. This will give you a rough
estimate for the monthly interest you will pay at that rate. There are
more specific methods to calculating interest rates, but this gives you
a way to easily figure it out.
Here is the
equation using the example of 12.97% APR rate and a balance of $5,000.
5000 x .1297 =
648.50 (yearly APR rate)
648.50 / 12 = $54.04 (monthly interest fees)
648.50 / 365 = $1.78 (daily interest fee)
This amount will
change from month to month as the interest rate can change and the
balance principle goes down on the credit card. It can give you an idea
how much interest you will pay if you were to buy with a credit card to
pay off later. This can be extremely important to know how much
interest you will pay so that you will be aware of the expenses of
paying for it later.
could be unaware of the skyrocketed interest rate that is why every bill
you receive from the credit card company should be reviewed for the
Interest rates are
should be a primary focus as one of the tools to get out of credit card
debt. By lowering your interest rate you could save thousands of
dollars depending on the amount that you owe as well as the interest
Letís say for
instance that instead of an APR rate of 12.97% rate you have a 21.99%
APR interest rate with a balance of $5,000.
5000 X .2199 =
$1099.50 (yearly APR rate at 21.99%)
1099.50 / 12 = 91.63 (monthly interest fees)
1099.50 / 365 = 3.01 (daily interest fees)
interest from 21.99% down to 12.97% could give you an extra $37.59
savings in interest every month. If you shopped around for promotional
interest rates on your card could potentially save even more on the
interest with low fixed rate APRís that can go for around 3.99% - 5.99%
until the balance is paid off. There usually is a transaction fee for a
balance transfer, but when you have higher interest rates you will find
that the interest savings will add up in the end.
interest rates are great if you know you can pay off the balance in the
6 Ė 12 month time period that you have been given. If you keep good
records of when the expiration is due on these promotions you can
transfer from one promotion to the next to avoid interest. There are
transfer fees that do add up, so if you have something for the long run
you might want to consider a low interest fixed rate APR that lasts
until the balance is paid off.
If you are looking
for lower interest rate deals and promotions make sure you have a credit
card that does not have pre-existing balances. The lower interest rate
balances are paid off first with the higher interest rate balances being
paid off last. The transfer would become in effective because you
really donít lower your interest as much as you would like to.
Books on Credit Card Debt
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