Question:

Credit card interest info? How does it work?

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I am a college student and used my credit card to buy about $500 in textbooks while I waited for my financial aid to be distributed. My APR is around 19%.

I would like to pay $250 this month so I can hold onto my financial aid until I'm done paying for school things, but I don't want to have to pay a ton of interest.

Does this mean that if I pay off $250 of it this month, I will incur about $50 in interest, so that my remaining balance will be $300? Or does the APR work differently than that? Any explanation will help.

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2 ANSWERS


  1. Different cards calculate finance charges different ways.  Try reading through the paperwork that came with your card or call the company and ask.  

    Remember that 19% APR is 19% per year, not per month.  It certainly shouldn't be any where near $50 even on the entire $500 balance.


  2. Your APR is your Annual Percentage Rate.

    So, pretty much, you're going to want to divide your APR by 12 (for the months of the year) and THAT is the percentage you'll be charged each month.

    Different banks calculate it differently.  Some credit cards calculate it based upon your average daily balance, while others go with whatever your balance is when your statement closes.

    Regardless of which method your bank uses, if $500 is the full amount on your card, at an APR of 19%, you can look at paying a maximum of $7.92 your first month for interest.

    As cheap as $7.92 sounds, you're not going to want to let it add up.  Your idea of paying half of it off right away is great!

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