Basic Financial Fitness: Credit Cards
- Annual interest rate (in this example 17.4%) divided by 12 months in a year, so 17.4/12=1.45%. 1.45% is how much you're going to be charged in interest on remaining balances.
- If you make a $300.00 payment against the original balance of $8,177.00, you'll drop the balance down to $7,877.00.
- Your bank (for example) charges interest at the end of the month, usually after your payment due date. 1.45% is going to be levied against the $7,877.00.
- This adds another $114.21 to your balance for a total of $7,991.22.
- This means that only $185.79 of your $300.00 payment has been applied to the principal balance.
- Your new balance is now higher than it was after you initially made your payment!
- Repeat each month.