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How to calculate credit card repayment

  • 07-02-2020 7:20pm
    #1
    Registered Users Posts: 112 ✭✭ kevincork


    Hi,

    I don't understand Irish credit card system and I was hoping to get some help.

    I have an AvantCard credit card (ex Tesco) I don't know what the pourcentage rate (perhaps 20%)

    I always payed the balance in full before the end of the month so never paid any interest so far.

    Let say I need to make a 2000€ payement and only pay my min repayment which is 25€ (I think..)

    1. Would I have to pay the balance in full the following month or can I do a partial repayment again?

    2. For each other month, will I have to pay 20% of interest (which seems crazy to me...) meaning for the next month I'll pay the left over balance 1,975€ + 395e (interest?) = 2370€

    Thank you for your reply in advance.


Comments

  • Registered Users Posts: 24,473 ✭✭✭✭ coylemj


    kevincork wrote: »
    1. would I have to pay the balance in full the following month or can I pay only a small part again ?

    If you're prepared to take the interest hit, you can pay the minimum amount (it's shown on the bill) every month. But running a continuous (never-ending) balance on your credit card could adversely affect your credit rating, especially if the card was issued by your own bank.

    Perversely, although your bank is happy to screw you with exorbitant interest on your credit card balances, they will double punish you by refusing to give you a loan because you're paying so much interest on what is effectively borrowed money.
    kevincork wrote: »
    2. for each other month, will I have to pay 20% of interest (which seems crazy to me...) meaning for the next month I'll pay the left over balance 1,975€ + 395e (interest?) = 2370€

    Not 20% each month. The rate of 20% is the annual rate. If you calculate the 12th root of 1.2 (1.20 to the power of 1/12), you get 1.015 so 20% per annum equates to a compound rate of 1.5% per month. So when you pay something off the bill but not the full amount, you will get whacked for 1.5% of the balance each time.


  • Registered Users Posts: 112 ✭✭ kevincork


    coylemj wrote: »
    If you're prepared to take the interest hit, you can pay the minimum amount (it's shown on the bill) every month. But running a continuous (never-ending) balance on your credit card could adversely affect your credit rating, especially if the card was issued by your own bank.

    Perversely, although your bank is happy to screw you with exorbitant interest on your credit card balances, they will double punish you by refusing to give you a loan because you're paying so much interest on what is effectively borrowed money.



    Not 20% each month. The rate of 20% is the annual rate. If you calculate the 12th root of 1.2 (1.20 to the power of 1/12), you get 1.015 so 20% per annum equates to a compound rate of 1.5% per month. So when you pay something off the bill but not the full amount, you will get whacked for 1.5% of the balance each time.

    Many thanks, make much more sense.


  • Registered Users Posts: 24,473 ✭✭✭✭ coylemj


    It's probably a bit more complicated. There will be a difference, for example, in the number of days interest levied on the balance you bring forward and the interest they charge on items you purchased in this billing period but haven't paid for. And if you make any cash withdrawals, interest is accrued from the date of the withdrawal, there is no interest-free holiday.


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