Credit Card Interest

[edro]

I usually rack up a few grand on my credit card and pay it off each month (for the rewards).

This month I am a little short, so if I pay it all off (Say, $1900 on a $2000 bill), how much interest will I get charged?

Interest on the $2000, or interest on the $100?

 

[imported_Mike]

Usually interest will be tacked on for your average daily balance. So it depends when you made the purchase(s).

 

[RossMAN]

Originally posted by: Mike
Usually interest will be tacked on for your average daily balance. So it depends when you made the purchase(s).

Mike is correct, your finance charges are based on your ADB (average daily balance).

So if your balance is $2000 for the majority of the 30 day billing cycle then YES your interest will be higher.

 

[SoulAssassin]

Yeah, average daily balance...pay it all off if you can stretch and make it.

 

[edro]

Thank you guys! I have never heard of ADB before. I'll stretch and cover it.

 

[imported_Imp]

Not sure, but I got raped $11 on a $372 charge for a stupid store-specific card with about 26% interest. Disputed this bull charge cause it was my first purchase on a new card I signed up for at the store. Some jackass (probably neighbour) got my bill in the mail, and sent it back. Then the store neglects to send another one out or even call me. So I call them a month later and it's already overdue. Thought I got a CSR to remove that charge, but the balance is still the same so gonna do some more complaining...

 

[LS20]

that's a new one to me , i always thought it was the remaining balance after the grace-period pay-off

 

[FoBoT]

read your TOS for your card, it tells you

 

[imported_Mike]

Originally posted by: LS20
that's a new one to me , i always thought it was the remaining balance after the grace-period pay-off

I've never heard of a grace period pay off before.

edit: grace

 

[LurkerSince2001]

I pay my full bill every month to avoid finance charges. One month, they posted my check for $0.01 - ONE CENT - less than the total bill. FULL finance charges on the whole $2000 bill!!!! I had the check copy and I called to b1tch about it - they still tried to tell me it was my fault but eventually they credited it back.

It causes finance charges the next month too, since you are no longer 'paying in full' but you have a 'previous balance'. It takes 2 months of paying in full to remove the charges.

I thought it was just an accident, but the last digit was supposed to be a 7 and they posted it as a 6 - there is no way anyone could mistake that or say they couldn't read my handwriting.

I think they did it on purpose and I wonder how often they do it to people who don't read through the charges on their bill and just pay it. :|

 

[Tiamat]

Originally posted by: LurkerSince2001
I pay my full bill every month to avoid finance charges. One month, they posted my check for $0.01 - ONE CENT - less than the total bill. FULL finance charges on the whole $2000 bill!!!! I had the check copy and I called to b1tch about it - they still tried to tell me it was my fault but eventually they credited it back.

It causes finance charges the next month too, since you are no longer 'paying in full' but you have a 'previous balance'. It takes 2 months of paying in full to remove the charges.

I thought it was just an accident, but the last digit was supposed to be a 7 and they posted it as a 6 - there is no way anyone could mistake that or say they couldn't read my handwriting.

I think they did it on purpose and I wonder how often they do it to people who don't read through the charges on their bill and just pay it. :|

Time to sign up for a different credit card. Thats just utter lameness and I would not want to do business with that credit card.

 

[flyfish]

I would not know the answer because I don't use credit cards. Rewards or not, I am glad I don't have to deal with any credit card BS.

 

[imported_Mike]

Originally posted by: flyfish
I would not know the answer because I don't use credit cards. Rewards or not, I am glad I don't have to deal with any credit card BS.

As long as you don't spend more then you actually have...there really is no credit card BS.

 

[dullard]

Edro, it was answered correctly above. The answer varies depending on your agreement. But most likely, you'll pay interest on a good chunk of that full $2000 if you don't pay in full. Heck, you might owe interest on that full $2000 and whatever you buy next month as well if you have 2-cycle billing. Beg, borrow, and steal to cover that last little bit and avoid the headache if you can. Heck, donate plasma to cover the little extra $100 if you need to.

That said, paying interest isn't the end of the world either. Even if they do charge you interest on the full $2000, you'll likely be hit with a ~$30 interest fee. You'll likely be more like $15. That isn't much. Important: Just stop using the credit card until it is paid off in full for an entire month. That way if you happen to have 2-cycle billing, you won't have more interest charges and it'll be kept to a one time charge.

Originally posted by: Mike
As long as you don't spend more then you actually have...there really is no credit card BS.

Exactly. With all the warranty extentions on products you buy, cash back, free insurance for trips or rental cars, no worry about not having money, not being a target for robbery, etc I'd never give up my credit cards. I also have never had any BS from them. Yes, there is fine print. Read it and understand the relevant sections and you'll be BS free for life.

 

[rh71]

I'm all for enjoying what you earn but a few grand on the cc each month... damn you guys are big spenders.

Check out these fast facts:
- The avg American male is buried under $2,369 of credit card debt, @ 17.5% interest.
- The avg U.S. renter is worth less than $5k, while the avg homeowner is worth more than $180k. Get a loan, and buy a place, instead of buying those toys every month.

Enjoy what you earn, not what you haven't yet.

 

[dullard]

Originally posted by: rh71
I'm all for enjoying what you earn but a few grand on the cc each month... damn you guys are big spenders.

Check out these fast facts:
- The avg American male is buried under $2,369 of credit card debt, @ 17.5% interest.
- The avg U.S. renter is worth less than $5k, while the avg homeowner is worth more than $180k. Get a loan, and buy a place, instead of buying those toys every month.

A few grand a month isn't a big spender. If you have a $40k/year job and put all of your bills on the CC, you can easilly rack 2 grand per month without going into debt. Heck, that is true even if you don't pay rent on the CC.

I'd be interested in knowing your source for those numbers. About half of Americans pay their CCs off in full each month. Thus the median CC debt is near $0. The average is higher of course since there are some people with lots of CC debt. So the reality is that you either have no problems or you are swimming in CC debt. Using an average number in this case just doesn't make any sense. And anyways, $2,369 isn't buried. Many people can pay that off easilly if they just stop spending on wants for a couple of months.

 

[flyfish]

Originally posted by: dullard
Edro, it was answered correctly above. The answer varies depending on your agreement. But most likely, you'll pay interest on a good chunk of that full $2000 if you don't pay in full. Heck, you might owe interest on that full $2000 and whatever you buy next month as well if you have 2-cycle billing. Beg, borrow, and steal to cover that last little bit and avoid the headache if you can. Heck, donate plasma to cover the little extra $100 if you need to.

That said, paying interest isn't the end of the world either. Even if they do charge you interest on the full $2000, you'll likely be hit with a ~$30 interest fee. You'll likely be more like $15. That isn't much. Important: Just stop using the credit card until it is paid off in full for an entire month. That way if you happen to have 2-cycle billing, you won't have more interest charges and it'll be kept to a one time charge.

Originally posted by: Mike
As long as you don't spend more then you actually have...there really is no credit card BS.

Exactly. With all the warranty extensions on products you buy, cash back, free insurance for trips or rental cars, no worry about not having money, not being a target for robbery, etc I'd never give up my credit cards. I also have never had any BS from them. Yes, there is fine print. Read it and understand the relevant sections and you'll be BS free for life.

Do you think that the CC companies offer these incentives out of the goodness of their hearts? They know that they will eventually get their money. I congratulate you on your discipline but a lot of people's financial lives are out of control. They are the ones that pay the most for these services. I see it as playing with fire and many people get burned.

 

[3NF]

Haven't you heard those radio commercials - "Credit Card debt is not your fault!"

 

[rh71]

Originally posted by: dullard

Originally posted by: rh71
I'm all for enjoying what you earn but a few grand on the cc each month... damn you guys are big spenders.

Check out these fast facts:
- The avg American male is buried under $2,369 of credit card debt, @ 17.5% interest.
- The avg U.S. renter is worth less than $5k, while the avg homeowner is worth more than $180k. Get a loan, and buy a place, instead of buying those toys every month.

A few grand a month isn't a big spender. If you have a $40k/year job and put all of your bills on the CC, you can easilly rack 2 grand per month without going into debt. Heck, that is true even if you don't pay rent on the CC.

I'd be interested in knowing your source for those numbers. About half of Americans pay their CCs off in full each month. Thus the median CC debt is near $0. The average is higher of course since there are some people with lots of CC debt. So the reality is that you either have no problems or you are swimming in CC debt. Using an average number in this case just doesn't make any sense. And anyways, $2,369 isn't buried. Many people can pay that off easilly if they just stop spending on wants for a couple of months.

I pulled the numbers out of a Maxim issue who did a special on making smart financial decisions. Also note it says avg American male. Toys.

At any rate, if you make $40k/year and pay mortgage each month, "a few grand" on top of that (because you can't pay a mortgage with a CC) is ludicrous... it's living paycheck to paycheck. If you're a two-income household, then it's better and manageable but it doesn't mean you're not a big spender every month.

Of course if you're just renting it's less than a mortgage... but we all know the story with renting vs. owning, as above. If the OP is living at home with parents and spending that much each month - when's he going to save enough to get his own place ?

I'm curious though - what are you people spending a few grand each month on ? Home repairs is only short term... are we talking about toys here ? That's a lot of toys.

 

[edro]

Utilities and Food is a huge portion of it.

 

[Rastus]

I'll loan you a dollar if you need it.