How Credit Card Interest Works - What is APR on a Credit Card & How Are Rates Calculated / Applied?
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- เผยแพร่เมื่อ 16 ส.ค. 2020
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In other words this credit cards make money off of people fucking up and not paying on time,
Why don’t they teach us this in high school 😐
If they did, they wouldn’t make any money.
We have the internet now kiddo
bro where did you go to school? This is basic algebra
@@happyjuice4251 A general introduction to finance / money management should be in the core curriculum, but they’d rather teach cursive and CRT.
@@BoxCatKeys cursive????! we gotta teach em how to write english first
Incredibly easy to understand. This video should be required curriculum. Excellent work.
Really great video! Credit cards are amazing tools for travel hacking and to accumulate points, but you certainly need to be aware of their dark side, and avoid high interest debt! Great overview... and even GREATER Andy Warhol shirt! Love it!
By far the best explanation of Interest Rate v APR. Thank you!
Wow, been using a CC for over a decade now. Still picking up new tidbits about how it works 😮 Crazy how interest builds from fresh, new purchases just because you’re carrying a balance over from a previous month.
Best just to manage and pay the statement balance on time and in full and avoid the headache entirely. 👍🏻 great vid, thanks
This was very helpful! Just got my first interest charge and i was so confused lol, first time credit card owner. I'm still learning! Good thing I caught it now moreso than later. Definitely need to change the way i pay off my card but again thank you for the clarity!
This video was perfect man, all my questions were answered. Good job 👍🏾
Thank you sooo much! For dumbing this up for me. I swear i got in a ball park what it mean for apr charge but now you cleared it for me and i thank you so much. Thank you!!! Great video!!!
You explained it on a way that easily made me understand it
Excellent walkthrough, thanks!
Thank you for this, I feel so dumb for not knowing already but just racked up a huge bill this month on my credit card and trying to figure out best way and when to pay it off
You articulated on this perfectly. I bet a child could understand this with how well you explained it haha
Thank you! I appreciate it. This information is exactly what I was looking for.
So much help! Thank you!!
Thanks for the vid homie. I appreciate it. You broke it down really well, keep on 👌
Very helpful, clear and concise. Thank you!
Amazing vid
Great information 🙏🏾 big thanks! 💯
Thank you so much for clear explanation.
Very practical and useful info. Much appreciated
Amazing content 🙏🏻
excellent video! thank you!
thank u sir. I love math so this was very clear to me
This was great, thank you
Awesome video!
I’m watching this because I’m thinking about getting a credit card to start building my credit and this video is very helpful 😊
Thank you! At the end of most videos I still had no idea how the interest rates equate to my cost.
Makes sense, great video!
Thank you, very helpful
This was explained very well excellent job
Thanks!
thanks very good info!!
So helpful. Thank you so much lol I am very reluctant about getting a credit card because I don't want to mess the little bit of credit I have completely up
Very helpful!
Great video
We can't forget the late fees.... Thats how they gouge your eyes out
Nice information
So if I have it setup to autopay the full statement on the due date, I will not pay any interest right?
Thank you
What is the purchase rate? Is it a rate we have to pay monthly or annually?
My bank manipulated the closing date and extended it further to include more spending
Thanks for the details. Trailing interest is a thing. And minimum interest fees too.
Wait so you pay your bill in full but can you still use your card during the grace period wouldn’t those purchases go to the next billing cycle because once you pay your statement balance the balances you charge in the grace period you don’t pay until the due date is over correct?
What about periodic finance charge, I get confuse with this and Principal payment, can you explain this or make a video
I just got an offer from Amex at 4% for 9 months so I plan to put 1k on that card and let it roast for 8 months without using that card again...hopefully could pay it all off on the 9th month. How much interest am I paying each month? Thank you.
Never have to carry a balance in my life till this pandemic!
What is residual interest?
What happens if you have a statement balance of 1000 but you only pay 999 and it’s the first month using how is interest charged for your next bill?
You can't blame banks for when you fail to make a payment guys. Not knowing how credit cards work is no excuse.
Shouldn’t be buying something or getting something you know nothing about.. this goes to every principle in life even for little things such as ordering food you have no idea what it contains and then getting upset you dont like it and can’t get a refund
I wish USA had like Mexico they give you months with paying interest depending on your purchases but you can get up to 24 months with out paying interest
Interest is highway robbery. But to be clear if I pay the minimum payment what I pay doesn't fully go back onto the balance? Only part of it does?
I asked this on another video talking about interest rates.
So I have a credit card, and I paid the balance off every month according to my statements, I’ve not ever been charged even a dime of interest. Here’s the thing though. I have a bill that set up on auto pay to pay every month out of that credit card and the due date that bill has just so happens to be the day before the cut off date of the of my credit card statement. so even though I paid balance off every month I also carry a balance over every month because of that payment. So how come I’ve never been charged any interest? Obviously, the fact that it was only charged one day prior. Has something to do with it. But how does that all actually work?
Thumbs up for Warhol alone :)
Wait. Sooooo pay off your balance anyway? The sooner the better ? Make sure the balance is 0 when the cycle ends ?
Twice a billing cycle so it doesn't hurt out wallet so much , I'm guessing ?
wicked legal crooks
me: Hey siri what is 24% of 1000 siri: its 240 me: hey siri whats 240 divided by 12 siri: that would be 20
$6000 !!!! interest rate 30% how much it will be I am using capital one thank you
Great info as always. I do have an off-topic question. I have a secured card that I have had for about 17 months, they say they increase the limit after a year, but haven't received one. They don't take requests. Do you think its because they don't make money off of me since I don't carry balances? If so should I carry a small balance? Sorry so long.
Try capital one.
No, do not carry a balance. That's not what you need to be doing.
Which bank is this?
Great video! Start from $0 to get 30 days of no interest. 30 days interest free loan! 👍🏽👍🏽
I used my credit card like a debit card now. I stayed 1% utilization all my credit cards...
I've always paid my balances off in full and this is the first time I won't be able to pay it off in full and was thinking my APR meant I'd get charged that 20 plus% each month... Heck I can handle a 1- 2% interest for the next month... In the back of my mind I was thinking there's no way people with credit card debt get charged 20% each month lol
im struggling with how to get my interest rate down. im new to this, never been taught! so mine is just a litttllee high. when you said, “revolve balance… and interest is charged” .. when interest is charged and you pay all of that off, does doing that drop your interest rate?
basically what I’m asking is what are the benefits of doing the whole “revolve balance” thing ?because I’ve heard about that plenty of times!! just curious
There are no benefits to a revolving balance, it is a bad thing that you want to avoid. Having a revolving balance means you're paying extra money to the credit card company in addition to the purchases you make with the card, it's basically money going down the drain. The goal is to pay off your entire balance by the due date so you have no revolving balance, that way you don't pay money other than the purchases you made with the card.
So if I pay off $500 out of the $1,000 on day 2, my average would be much lower by the end of the month correct? Because I only have $1,000 the first 2 days and have $500 the remaining 28 days.
Yes
Nope still confused. What Im getting is even if you don't use the card you gotta pay them?? The more I look up information the more confused I get and im like ready to cry
Some CCs require a fee to use. Bigger spending means bigger rewards, theoretically. Reading a specific card’s benefits and comparing multiple cards goes a long way in better understanding this concept
APR has nothing to do with that. The thing I think you're concerned with is Annual Fees which is how much you pay for having the card period. It's like a subscription (paying 10$ a month for Netflix, for example). It doesn't matter whether you use your card or not, just like it doesn't matter if you watch Netflix or not. You're still paying that 10$. The good news is some cards have no annual fees which is the best bet if you're starting out. You won't pay anything, even if you don't use the card. It could actually benefit you if you keep that card open, even if you don't use it, because it comes with a credit history. Using it once or twice a year and paying that back in full is going to boost your score.
APR, the topic of the video, is what you pay (interest) if you miss paying off your card each month. Don't worry about APR if you're confident you're going to pay off your card on time.
I’m a bit confused on the math, so 24/365= .06575 but when we calculated that against the principal balance the calculation in the video was (1000x .0006575) why were the added zeros there?
When i do the math of 1000x.06575 what the daily interest was, it becomes 65.75 a day then multiplying that by 31 gives me over 2k, i know I’m incorrect i just want to understand why the zeros were added in order to grasp this fully.
I’m missing or forgetting something mathematically
Somebody answered in the comments, i forgot to change something into percent you have to divide it by a hundred and now i feel like a dumbass, gonna leave the comment up so y’all can get a laugh or two
When going to pay your credit car bill online, is it better to pay 'Minimum Balance, 'Last Statement Balance', or 'Current Balance'? Will paying off a certain one (i.e. last balance vs current balance) affect the interest rate after payment?
It depends on how much you want to payback a loan. Paying the minimum you will always pay interest and carry over a balance. Paying off the statement balance no interest if you have always been a transactor (a person who pays off the balance every month). Current Balance, is a total balance of all your transactions including your statement balance with current charges, (current charges will be on your next billing statement) pay that off, no interest if you have always paid on time and paid off your balance in full each month.
If you ever carried over a balance and then the next billing statement you decided to pay off the full balance always ask an agent how much it will be to pay off my full balance because they will give you the correct amount with the interest included.
if you are a person who carries over a balance you will be charged a residual interest. Your residual interest isn't in your current balance depending on when you make the payment in full. Residual interest occurs when you carry over a balance and/or keep carrying over a balance and then you decide to pay it off.
Ex residual interest: Residual interest occurs when your last statement being issued and the date when your full payment reaches the company. You can pay as much as you like in your billing cycle to get your balance down so your interest won't be as high as well..
@@michellegomez5429 thank you so much!! So helpful :)
This is good stuff however i thought most cards from major issuers do not charge daily interest? I've revolved balances in the thousands after a tax bill for weeks but always paid it off before the statement closing date and have never paid a dime in interest. Maybe you can make a video with a list of cards to watch out for that do charge daily interest? Eg I've heard capital one does this...
Credit one does capital one dosen't.
@@lisacastano1064 Thanks! Are there any other cards to watch out for that have daily interest?
@@naughtyorgneiss a bunch of them you need to watch the feed too they can be worse.
Why dont i understand yet😭
Do you have to pay "before" or "on the due date" to avoid interest? Meaning if due date is September 13, you have to pay by September 12, 11:59pm or September 13, 11:59pm?
Yah this alr is makin me crazy😆
Have it scheduled a few days before Sep 13th if possible. So the payment can process, especially if the due date falls on the weekend/holiday
I like to have the payment "cleared" by the due date. And some card companies require the payment to be made by 8pm on the due date, not 11:59pm, so be careful:)
OK so i have a credit card balance of $17,000 with 22.24% interest rate and i can pay this off buy selling my Honda HRV with 25,000 miles on it to carvana which they will pay me $18,000 for it. Now on the other hand I can buy a new Tesla model Y which they are running a promo of 0.99% APR for 60 months. Vehicle amount is $42,990/destination fee 1,390 / order fee $250/minus instant federal tax credit of $ 7,500 for this EV car . Total of $37,130 plus tax and other misc small charge. My question is. Will i get big savings out of it if when doing this since the car has a very low interest. Thank you. Need your answer asap please. Or what is the best strategy to do.
Reply
Yes. You need to pay that credit card off asap. The Tesla payment would be $666 per month and after 5 years you will have paid $1000 in interest. If you put $666 per month towards the credit card balance you could pay it off in 3 years, but you would pay $6,236 in interest.
@@jonb5668 thank you. That’s also what I was thinking and calculating. I’m glad you agreed
I just dont get where did the “ 0.0006575” came from.
Like where the hell those 3 extra cero’s came from. This is why I hated math class
my exact thoughts
By converting percent to decimal:
0.06575 is a percentage = 0.06575%.
In order to get it in decimal form, you will need to divide it by 100 = 0.0006575.
My girl paid off her Amazon credit card before the due date and she got hit with interest and when she reached out they told her that interest was charged daily
Dats fucked up
Yea auto pay is the way to go
👍👍👍👍👍
I’m confused, so I need to pay the current balance instead of the the statement to avoid interest charge?
Yes, however if you were carrying a balance then you will still have to pay the interest that accrued which will be billed to you on the next statement. Bottom line is NEVER carry a balance otherwise you are incurring interest rate costs.
I swear these credit card interest rates are just like your toxic ex girlfriend
As for subscriptions after leaving a nugget behind not off the bat👾
If you pay off current balance when you get the bill you will never pay interest! What is so difficult about this concept? That’s why people get in trouble with credit cards!
9:38 - 11:27 says differently ??
You have to pay the statement balance at the due date you can pay your current balance down to we’re you have a lower utilization but never pay the minimum payment by the due date your gonna be racked up with interest charges.
And this is what should be taught in high school. But they don't. Wonder why.
These credit cards are a ripoff. My goodness on every $1000 you pay $30 every month (if the interest rate is about 30%) ... so if you have $20000 credit then you would pay 20x20 = $600 every month and this is not reducing your credit balance. Which means this man just saved my life and woke me up. Thank you, Sir! May god bless you for this information easy to understand.
Yeah, but who spends $20,000 on the credit card every month and carries the entire balance over
Not every month $20000 added up over two years ... bottom line credit is good as long as you leave it under 10% @@meredithsickel2709
If you're smart, you don't charge 20k to it and not pay it off