Interest rate lulz. Also, don't carry a balance

[Fenixgoon]

So my credit card bill is due at the end of the month, and it's a bit higher than normal for me since I bought a new monitor. The total was $700 (I put rent on my CC, which is $370). At any rate, I believe BoA charges me 16% interest yearly, which comes out to 1.2368% monthly interest.

The minimum payment for the $700 charge was $15 (I always pay off in full). Curious, I put my leet math skills to work and figured out how long it'd take me to pay off $700 at a 15/month payment. My answer came out to an astounding 92 months, or just shy of 8 years :laugh:

I never carry a balance.. don't think I want to, either 😛

for those interested, here's my math:

1.16 = exp(12K) monthly interest
K ~ 0.012368

dM/dt = KM - 15
dM/dt - KM = -15
u = exp(-Kt)
exp(-Kt)*dM/dt - Kexp(-Kt)*M = -15*exp(-Kt)
[M*exp(-Kt)]' = -15*exp(-Kt)
integrate
M*exp(-Kt) = (15/K)*exp(-Kt) + C
M = 15/K + C*exp(Kt)
for M = 700 at t = 0, C ~ -512.8
for M = 0, t ~ ~69.6 (70)
total cost: 15*70 = $1050, an extra 50% above the original bill.

hooray math. boo interest 😛

 

[FelixDeCat]

Originally posted by: Fenixgoon

My minimum payment for the $700 charge was $15. Curious, I put my leet math skills to work and figured out how long it'd take me to pay off $700 at a 15/month payment. My answer came out to an astounding 92 months, or just shy of 8 years

You gonna get raped.

 

[rivan]

Originally posted by: Fenixgoon
1.16 = exp(12K) monthly interest
K ~ 0.012368
dM/dt = KM - 15
dM/dt - KM = -15
u = exp(-Kt)
exp(-Kt)*dM/dt - Kexp(-Kt)*M = -15*exp(-Kt)
[M*exp(-Kt)]' = -15*exp(-Kt)
integrate
M*exp(-Kt) = (15/K)*exp(-Kt) + C
M = 15/K + C*exp(Kt)
for M = 700 at t = 0, C ~ -512.8
for M = 0, t ~ 92

I think you just broke the internet.

 

[randay]

or you could just pay it off right now.

 

[ivan2]

how much u end up paying?

 

[dabuddha]

I don't believe the OP said he was going to pay the minimum.

 

[Fenixgoon]

Originally posted by: randay
or you could just pay it off right now.

Originally posted by: ivan2
how much u end up paying?

seeing as it's due at the end of the month, i won't pay it off for another few days, but i will be paying the full balance.

i simply wanted to see how long it'd take to pay off assuming minimum monthly payments.

 

[vshah]

exactly why i never carry a balance

 

[sutahz]

So why didn't you put that your $700 bill would cost $1380 over those 8yrs? Gotta give the customers what they want.

 

[Fenixgoon]

Originally posted by: sutahz
So why didn't you put that your $700 bill would cost $1380 over those 8yrs? Gotta give the customers what they want.

i edited the OP to include the total cost. happy? 😛

 

[LS21]

too much math

 

[darkxshade]

I honestly think if I were to put 700 into any decent ETF in the current economy(assuming we have indeed hit bottom), it'll be > 1400 in 8 years so I dunno. Of course if I wanted to really do this, I'd borrow from a bank at a lower rate but just sayin...

 

[Fenixgoon]

woops, i epic failed at math. turns out, the payback period is *only* 70 months.

i double checked my answer through an euler forward numerical solution 😀

 

[racolvin]

Originally posted by: Fenixgoon

for those interested, here's my math:

1.16 = exp(12K) monthly interest
K ~ 0.012368

dM/dt = KM - 15
dM/dt - KM = -15
u = exp(-Kt)
exp(-Kt)*dM/dt - Kexp(-Kt)*M = -15*exp(-Kt)
[M*exp(-Kt)]' = -15*exp(-Kt)
integrate
M*exp(-Kt) = (15/K)*exp(-Kt) + C
M = 15/K + C*exp(Kt)
for M = 700 at t = 0, C ~ -512.8
for M = 0, t ~ ~69.6 (70)
total cost: 15*70 = $1050, an extra 50% above the original bill.

hooray math. boo interest 😛

wtf?? 😕

And later ....

Originally posted by: Fenixgoon
i double checked my answer through an euler forward numerical solution

Holy headaches Batman ... I didn't understand a word of all that and frankly I'm not sure I want to ...

 

[TraumaRN]

Well people who get into tens of thousands of dollars in credit card could live 10 lives and just pay minimum and still not pay off the bill....actually those pay day advance places are worse, that is more or less legalized loan sharking

 

[amdhunter]

Now imagine debt in the 5-digit range, and imagine what I went through. 🙂
Never.Fucking.Again.

 

[Fenixgoon]

Originally posted by: amdhunter
Now imagine debt in the 5-digit range, and imagine what I went through. 🙂
Never.Fucking.Again.

the monthly interest on that.. :Q:Q

🙁 🙁

 

[ja1484]

Pay less now always = win.

It's basic math. What costs the least total money when all is said and done. The only time it's worth paying interest on something is if you stand to profit from the loan more than you will pay back including interest, i.e. school loans, business startup loans, car loans (so you can get to fucking WORK), etc. in which case the interest is technically an investment anyway.

Otherwise, pay in full and be done with it.