Getting credit

[PokerDegenerate]

just as some food for thought with credit cards.

If your credit card is charging 18% APR and you have used it to buy a computer for 500 GBP, how long will it take to pay off, if you make just the minimum monthly payment (if your miniumum payment is 2% of the outstanding balance with a minimum of 5 GBP)?

A: 2 years 8 months

B: 8 years 6 months

C: 16 years 8 months

D: 19 years 4 months


The answer was D
It would take you a staggering 19 years and 4 months. You would also have paid 965 GBP in interest, meaning the 500 GBP computer actually cost you 1,465 GBP.

Yeah that is a horrifying fact but as long as you don't misuse them you will be fine.... But that is a very nice piece of information there for people who try to justify putting a new rig on their credit card and think they can only pay minimum payments on it until its paid off....

 

[Austinn1]

Thats interesting poker - and no I chose the card with no annual fee.

I'm not totally sure the max. It didnt say, I think it will tell me in the mail when the card comes. However, its somewhere between 300-5000$

Chances are $300.

Don't let other peoples opinions scare you man.

Credit cards are good. You cant avoid debt, at all. Debt is part of life.

Buy the things you want one at a time, if you buy a tv, pay it off first, dont turn around and buy a computer. One thing at a time.

People who say don't buy the things you want on a credit card, are just afraid. If you are responsible enough, you can buy whatever you want on a credit card, and be just fine.

Its the people who go out and buy everything they see and put it on credit card. Then when the bill comes, they are screwed.

Use it wisely, be responsible with it, and you will be just fine.

just as some food for thought with credit cards.

If your credit card is charging 18% APR and you have used it to buy a computer for 500 GBP, how long will it take to pay off, if you make just the minimum monthly payment (if your miniumum payment is 2% of the outstanding balance with a minimum of 5 GBP)?

A: 2 years 8 months

B: 8 years 6 months

C: 16 years 8 months

D: 19 years 4 months


The answer was D
It would take you a staggering 19 years and 4 months. You would also have paid 965 GBP in interest, meaning the 500 GBP computer actually cost you 1,465 GBP.

Im sorry, I dont know where you got that but, I believe its wrong.

Think about, $500 dollar computer, at 18% interest. 500*.18= 90

$500 plus interest = $590.

$590*.03 (.03= 3% of the balance) = 17.7.

Thats $17.7 a month.
$590/17.7= 33.33333 months to pay it off. Thats roughly 3 years to pay that $500 computer off.

 

[PokerDegenerate]

Im sorry, I dont know where you got that but, I believe its wrong.

Think about, $500 dollar computer, at 18% interest. 500*.18= 90

$500 plus interest = $590.

$590*.03 (.03= 3% of the balance) = 17.7.

Thats $17.7 a month.
$590/17.7= 33.33333 months to pay it off. Thats roughly 3 years to pay that $500 computer off.

His numbers may be wrong but yours are as well....You are only conducting one years worth of interest not the entire lifetime of the debt...Interest is compounded annually not just a 1 time thing also interest is also broken up into individual monthly payments which equal the total (roughly) at the end of the year (APR) Annual Percentage Rate.....But I am with ya on not believing that it is 19 years now tho....Hey maybe forgot a zero on the 500 or something....... maybe its 50,000 not 500...

 

[Rubber314Chicken]

austinn you have to do interest each month.

I just put in my calc an got about 20 years assuming 12 payments a year about $20 each. I can't do a variable payment setup with the program I have, but that seems like its about right.

And root knows this stuff pretty well.

 

[root]

Im sorry, I dont know where you got that but, I believe its wrong.

Think about, $500 dollar computer, at 18% interest. 500*.18= 90

$500 plus interest = $590.

$590*.03 (.03= 3% of the balance) = 17.7.

Thats $17.7 a month.
$590/17.7= 33.33333 months to pay it off. Thats roughly 3 years to pay that $500 computer off.

The first thing that I can see wrong with your calculations is that you're looking at the amount you'd have to pay if you paid it off in a lump sum, rather than by instalments, as you've done that you've actually used a higher rate of APR without knowing it.

(for example if you borrow $1000 for 1 year at 20% APR, so at the end of the year you pay back a lump sum of $1200, everyone can see how that works.) however, if you;re expecting to pay by instalments you have to consider that the interest is charged at a monthly equivalent of APR and your total amount that you pay back will therefore be lower.
so you borrow $1000 in month 1 you pay back $100 so now your amount owed, and the amount that they charge interest on over a year is only $900 not $1000, and so the interest amount goes down as well. in that scenario if you borrow $1000 and pay back 12 $100 amounts in monthly instalments your total repayed amount is $1200 but your APR has worked out at around 40% rather than 20%,

as for the numbers in the example I gave...
I got that from a finance quiz on the BBC website...
I didn't bother to check the numbers, though now that you've said that it's wrong I'll have a quick check and see what I can come up with.

Firstly, I'm going to admit to cheating.
I've used a monthly rate calculator found here
http://www.stoozing.com/mon2yr.htm

frankly because the example here http://en.wikipedia.org/wiki/Annual_percentage_rate of how APR is calculated, and the idea of transposing those sums to find the monthly rate was a rather daunting task.
the monthly rate is 1.3888
anyway, so we're left with a spreadsheet
with these columns
month (start at jan 01 and increment)
balance at month start (for the first row this is 500, after that it is the month end balance of the previous row)
interest added (=[[balance at start/100] * 1.388])
repaid amount (=balance at start *0.02)-or £5 whichever is greater
balance at month end (=balance at start + interest -repaid)


You'll have to bear with me, as this can't all be put into one post. (it has to stretch over three...)

and I can't be bothered to make all the column spacing perfect.

 

[root]

month	balance	        interest charge payment	        end balance
Jan-01	500	        6.944	        10	        496.944
Feb-01	496.944	        6.901558272	9.93888	        493.9066783
Mar-01	493.9066783	6.859375948	9.878133565	490.8879207
Apr-01	490.8879207	6.817451442	9.817758413	487.8876137
May-01	487.8876137	6.775783179	9.757752274	484.9056446
Jun-01	484.9056446	6.734369592	9.698112892	481.9419013
Jul-01	481.9419013	6.693209125	9.638838026	478.9962724
Aug-01	478.9962724	6.652300231	9.579925448	476.0686472
Sep-01	476.0686472	6.611641372	9.521372943	473.1589156
Oct-01	473.1589156	6.57123102	9.463178312	470.2669683
Nov-01	470.2669683	6.531067656	9.405339366	467.3926966
Dec-01	467.3926966	6.49114977	9.347853932	464.5359924
Jan-02	464.5359924	6.451475863	9.290719849	461.6967484
Feb-02	461.6967484	6.412044442	9.233934969	458.8748579
Mar-02	458.8748579	6.372854027	9.177497158	456.0702148
Apr-02	456.0702148	6.333903143	9.121404296	453.2827136
May-02	453.2827136	6.295190327	9.065654273	450.5122497
Jun-02	450.5122497	6.256714124	9.010244994	447.7587188
Jul-02	447.7587188	6.218473087	8.955174376	445.0220175
Aug-02	445.0220175	6.18046578	8.900440351	442.302043
Sep-02	442.302043	6.142690773	8.846040859	439.5986929
Oct-02	439.5986929	6.105146647	8.791973858	436.9118657
Nov-02	436.9118657	6.06783199	8.738237313	434.2414603
Dec-02	434.2414603	6.030745401	8.684829207	431.5873765
Jan-03	431.5873765	5.993885485	8.631747531	428.9495145
Feb-03	428.9495145	5.957250857	8.57899029	426.3277751
Mar-03	426.3277751	5.92084014	8.526555501	423.7220597
Apr-03	423.7220597	5.884651965	8.474441194	421.1322705
May-03	421.1322705	5.848684972	8.422645409	418.55831
Jun-03	418.55831	5.81293781	8.371166201	416.0000816
Jul-03	416.0000816	5.777409134	8.320001633	413.4574891
Aug-03	413.4574891	5.742097609	8.269149783	410.930437
Sep-03	410.930437	5.707001909	8.218608739	408.4188301
Oct-03	408.4188301	5.672120713	8.168376603	405.9225742
Nov-03	405.9225742	5.637452711	8.118451485	403.4415755
Dec-03	403.4415755	5.6029966	8.068831509	400.9757406
Jan-04	400.9757406	5.568751085	8.019514811	398.5249768
Feb-04	398.5249768	5.534714878	7.970499537	396.0891922
Mar-04	396.0891922	5.500886701	7.921783844	393.668295
Apr-04	393.668295	5.467265281	7.873365901	391.2621944
May-04	391.2621944	5.433849356	7.825243888	388.8707999
Jun-04	388.8707999	5.400637669	7.777415998	386.4940216
Jul-04	386.4940216	5.367628971	7.729880431	384.1317701
Aug-04	384.1317701	5.334822023	7.682635402	381.7839567
Sep-04	381.7839567	5.302215591	7.635679134	379.4504932
Oct-04	379.4504932	5.269808449	7.589009863	377.1312918
Nov-04	377.1312918	5.23759938	7.542625835	374.8262653
Dec-04	374.8262653	5.205587173	7.496525306	372.5353272
Jan-05	372.5353272	5.173770624	7.450706543	370.2583913
Feb-05	370.2583913	5.142148538	7.405167825	367.995372
Mar-05	367.995372	5.110719726	7.359907439	365.7461843
Apr-05	365.7461843	5.079483007	7.314923685	363.5107436
May-05	363.5107436	5.048437207	7.270214871	361.2889659
Jun-05	361.2889659	5.017581159	7.225779318	359.0807677
Jul-05	359.0807677	4.986913702	7.181615355	356.8860661
Aug-05	356.8860661	4.956433686	7.137721322	354.7047785
Sep-05	354.7047785	4.926139963	7.094095569	352.5368229
Oct-05	352.5368229	4.896031396	7.050736457	350.3821178
Nov-05	350.3821178	4.866106852	7.007642356	348.2405823
Dec-05	348.2405823	4.836365207	6.964811646	346.1121358
Jan-06	346.1121358	4.806805343	6.922242717	343.9966985
Feb-06	343.9966985	4.777426148	6.87993397	341.8941907
Mar-06	341.8941907	4.74822652	6.837883813	339.8045334
Apr-06	339.8045334	4.719205359	6.796090667	337.7276481
May-06	337.7276481	4.690361576	6.754552961	335.6634567
Jun-06	335.6634567	4.661694086	6.713269133	333.6118816
Jul-06	333.6118816	4.633201812	6.672237632	331.5728458
Aug-06	331.5728458	4.604883682	6.631456916	329.5462726
Sep-06	329.5462726	4.576738633	6.590925451	327.5320857
Oct-06	327.5320857	4.548765607	6.550641715	325.5302096
Nov-06	325.5302096	4.520963551	6.510604193	323.540569
Dec-06	323.540569	4.493331422	6.47081138	321.563089
Jan-07	321.563089	4.465868181	6.431261781	319.5976954
Feb-07	319.5976954	4.438572794	6.391953909	317.6443143
Mar-07	317.6443143	4.411444237	6.352886287	315.7028723
Apr-07	315.7028723	4.38448149	6.314057446	313.7732963
May-07	313.7732963	4.357683539	6.275465926	311.8555139
Jun-07	311.8555139	4.331049378	6.237110279	309.949453
Jul-07	309.949453	4.304578004	6.198989061	308.055042
Aug-07	308.055042	4.278268423	6.16110084	306.1722096
Sep-07	306.1722096	4.252119646	6.123444191	304.300885
Oct-07	304.300885	4.226130691	6.0860177	302.440998
Nov-07	302.440998	4.20030058	6.04881996	300.5924786
Dec-07	300.5924786	4.174628343	6.011849573	298.7552574
Jan-08	298.7552574	4.149113015	5.975105148	296.9292653
Feb-08	296.9292653	4.123753636	5.938585305	295.1144336
Mar-08	295.1144336	4.098549254	5.902288672	293.3106942
Apr-08	293.3106942	4.073498921	5.866213884	291.5179792
May-08	291.5179792	4.048601695	5.830359584	289.7362213
Jun-08	289.7362213	4.023856642	5.794724427	287.9653535
Jul-08	287.9653535	3.99926283	5.759307071	286.2053093
Aug-08	286.2053093	3.974819336	5.724106186	284.4560224
Sep-08	284.4560224	3.95052524	5.689120449	282.7174272
Oct-08	282.7174272	3.92637963	5.654348545	280.9894583
Nov-08	280.9894583	3.902381597	5.619789166	279.2720508
Dec-08	279.2720508	3.878530241	5.585441015	277.56514
Jan-09	277.56514	3.854824664	5.5513028	275.8686618
Feb-09	275.8686618	3.831263976	5.517373237	274.1825526
Mar-09	274.1825526	3.80784729	5.483651052	272.5067488
Apr-09	272.5067488	3.784573728	5.450134976	270.8411876
May-09	270.8411876	3.761442413	5.416823751	269.1858062
Jun-09	269.1858062	3.738452477	5.383716125	267.5405426
Jul-09	267.5405426	3.715603055	5.350810852	265.9053348
Aug-09	265.9053348	3.69289329	5.318106696	264.2801214
Sep-09	264.2801214	3.670322326	5.285602428	262.6648413
Oct-09	262.6648413	3.647889316	5.253296826	261.0594338
Nov-09	261.0594338	3.625593416	5.221188675	259.4638385
Dec-09	259.4638385	3.603433789	5.18927677	257.8779955
Jan-10	257.8779955	3.581409602	5.157559911	256.3018452
Feb-10	256.3018452	3.559520026	5.126036904	254.7353283
Mar-10	254.7353283	3.53776424	        5.094706567	253.178386
Apr-10	253.178386	        3.516141425       5.06356772	251.6309597
May-10	251.6309597       3.494650769	5.032619194	250.0929913
Jun-10	250.0929913	3.473291463	5.001859826	248.5644229
Jul-10	248.5644229	3.452062706	5	247.0164856
Aug-10	247.0164856	3.430564953	5	245.4470506
Sep-10	245.4470506	3.408768639	5	243.8558192
Oct-10	243.8558192	3.386669618	5	242.2424889
Nov-10	242.2424889	3.364263685	5	240.6067525
Dec-10	240.6067525	3.341546579	5	238.9482991
Jan-11	238.9482991	3.318513978	5	237.2668131
Feb-11	237.2668131	3.2951615	5	235.5619746
Mar-11	235.5619746	3.271484703	5	233.8334593
Apr-11	233.8334593	3.247479083	5	232.0809384
May-11	232.0809384	3.223140072	5	230.3040785
Jun-11	230.3040785	3.198463042	5	228.5025415
Jul-11	228.5025415	3.173443296	5	226.6759848
Aug-11	226.6759848	3.148076077	5	224.8240609
Sep-11	224.8240609	3.122356557	5	222.9464174
Oct-11	222.9464174	3.096279845	5	221.0426973
Nov-11	221.0426973	3.06984098	5	219.1125382
Dec-11	219.1125382	3.043034931	5	217.1555732
Jan-12	217.1555732	3.0158566	5	215.1714298
Feb-12	215.1714298	2.988300817	5	213.1597306
Mar-12	213.1597306	2.960362339	5	211.1200929
Apr-12	211.1200929	2.932035851	5	209.0521288
May-12	209.0521288	2.903315965	5	206.9554447
Jun-12	206.9554447	2.874197217	5	204.829642
Jul-12	204.829642	        2.844674068	5	202.674316
Aug-12	202.674316	        2.814740901	5	200.4890569
Sep-12	200.4890569	2.784392023	5	198.273449
Oct-12	198.273449	        2.753621659	5	196.0270706
Nov-12	196.0270706	2.722423957	5	193.7494946
Dec-12	193.7494946	2.690792981	5	191.4402876
Jan-13	191.4402876	2.658722714	5	189.0990103
Feb-13	189.0990103	2.626207055	5	186.7252173
Mar-13	186.7252173	2.593239818	5	184.3184571
Apr-13	184.3184571	2.559814733	5	181.8782719
May-13	181.8782719	2.52592544	5	179.4041973
Jun-13	179.4041973	2.491565492	5	176.8957628
Jul-13	176.8957628	2.456728354	5	174.3524912
Aug-13	174.3524912	2.421407397	5	171.7738986
Sep-13	171.7738986	2.385595903	5	169.1594945
Oct-13	169.1594945	2.349287059	5	166.5087815
Nov-13	166.5087815	2.312473958	5	163.8212555
Dec-13	163.8212555	2.275149596	5	161.0964051
Jan-14	161.0964051	2.237306874	5	158.3337119
Feb-14	158.3337119	2.198938592	5	155.5326505
Mar-14	155.5326505	2.160037451	5	152.692688
Apr-14	152.692688	        2.120596051	5	149.813284
May-14	149.813284	        2.080606889	5	146.8938909
Jun-14	146.8938909	2.040062357	5	143.9339533
Jul-14	143.9339533	1.998954743	5	140.932908
Aug-14	140.932908	        1.957276227	5	137.8901843
Sep-14	137.8901843	1.915018879	5	134.8052031
Oct-14	134.8052031	1.872174661	5	131.6773778
Nov-14	131.6773778	1.828735423	5	128.5061132
Dec-14	128.5061132	1.7846929	5	125.2908061

 

[root]

Jan-15	125.2908061	1.740038715	5	122.0308448
Feb-15	122.0308448	1.694764373	5	118.7256092
Mar-15	118.7256092	1.648861261	5	115.3744705
Apr-15	115.3744705	1.602320646	5	111.9767911
May-15	111.9767911	1.555133675	5	108.5319248
Jun-15	108.5319248	1.507291371	5	105.0392162
Jul-15	105.0392162	1.458784634	5	101.4980008
Aug-15	101.4980008	1.409604235	5	97.90760503
Sep-15	97.90760503	1.359740819	5	94.26734585
Oct-15	94.26734585	1.309184899	5	90.57653075
Nov-15	90.57653075	1.257926859	5	86.83445761
Dec-15	86.83445761	1.205956947	5	83.04041455
Jan-16	83.04041455	1.153265277	5	79.19367983
Feb-16	79.19367983	1.099841825	5	75.29352166
Mar-16	75.29352166	1.045676429	5	71.33919808
Apr-16	71.33919808	0.990758783	5	67.32995687
May-16	67.32995687	0.935078441	5	63.26503531
Jun-16	63.26503531	0.87862481	5	59.14366012
Jul-16	59.14366012	0.821387152	5	54.96504727
Aug-16	54.96504727	0.763354576	5	50.72840185
Sep-16	50.72840185	0.704516045	5	46.43291789
Oct-16	46.43291789	0.644860364	5	42.07777826
Nov-16	42.07777826	0.584376184	5	37.66215444
Dec-16	37.66215444	0.523052001	5	33.18520644
Jan-17	33.18520644	0.460876147	5	28.64608259
Feb-17	28.64608259	0.397836795	5	24.04391938
Mar-17	24.04391938	0.333921952	5	19.37784134
Apr-17	19.37784134	0.26911946	        5	14.6469608
May-17	14.6469608	        0.203416992	5	9.850377787
Jun-17	9.850377787	0.136802047	5	4.987179834
Jul-17	4.987179834	0.069261954	5	0.056441788
Aug-17	0.056441788	0.000783864	0.06	-0.002774349

so I think that the numbers are wrong as well, I get 17 and a half years, (not 19) though you'll see that I havene't rounded at all, banks would have a number like £5.8556 and make it £5.86

and a few pennies each month year on year over 17 and a half years will probably add up...


either way, 17 and a half, or 19 years, after that long you probably don't even want the computer any more!

 

[CrackerJacker1]

Question: Does checking your credit make your credit score worse... ? If so thats lame ..

 

[Rubber314Chicken]

when you apply for something and they chek it its lowered a tiny tiny bit, but not much.

when you check it it doesn't go down.

 

[Austinn1]

when you apply for something and they chek it its lowered a tiny tiny bit, but not much.

when you check it it doesn't go down.

Hmm, thats odd. Seeming how I check mine monthly. It has never went down. And their are alot of sources that say it isnt lowered.