simple maths question about interest

samhail

I never grasped the whole interest thing with credit cards and im sure it is as simple as adding...

Lets say i have €1,000 oweing on my credit card with a 20% APR.
If i dont pay that €1,000 off after the 2nd month (56 days after its invoiced)... does the interest work out as
20% of €1,000 = €200 and €200/12 (months in a year... since the 20% is APR) = €16.66

so i would have to pay €17 euro interest on my credit card bill for that month ? which is nearly 2% of what i owe... which sounds very low to me.

where am i going wrong ?

jimoc

Nope, thats the right way to be calculating it,

however some companies get even more complicated then that.

In some cases if you don't clear the amount after the 56 days they then calculate the interest daily.
so if you have 100 quid outstanding for 56 days they charge 56 days interest.
if you have 300 for 45 days its 45 days interest etc.

And dont forget that the following month they will charge interest on the interest

chris85

almost correct. The problem is they charge the interest monthly (calulated daily) and so interest is being put on top of interest month after month. Its works by cumulative interest. Also not quite correct as well due to the fact that if a payment is missed (the minimum amount) then there are late fees as well which aint great.

SomeGuyCalledMi

Thanks for explaining. It is a dreadfull waste of money when you see how it works.

samhail

yeah thanks for the replies (i didnt get emails for these replies)