Continued from page 1
76,500 x 30 = $2,295,000 -
2,295,000 / 30 = $76,500 (Average daily balance)
5.75% / 365 = 0.1575 (Daily periodic rate)
.01575 x 30 x $76,500 = $361.46
$361.46 is financing added to current balance: $76,500 + $361.46 = $76,861.46
It is difficult to determine exact amount of payment when many purchases are made through month. Still you can get in ball park.
The importance of paying down credit card balances Knowing how credit card interest is calculated can make a big difference on how you pay it off. Rather than paying your credit card bill once a month, pay as early and often as you can every month. This way you'll reduce average daily balance and thus amount interest charged. If you are paying off larger amounts of debt, difference can be huge as making minimum payment will assure you years of billing cycles. So pay extra and pay often: For a credit card balance of $8,000 with 10% interest payment and with a $100 minimum payment, it would take a little over 43 years to pay it off. Not to mention interest paid would be around $13,300. So you borrow $8,000 you pay $21,300.
Note, that many home equity loans and equity lines of credit determine interest in a similar fashion. So pay those cards off!
For more information visit http://www.flipping70.com
David has been a personal finance specialist for the last five years. He most recent personal finance book, I'm Not Flipping Burgers When I'm 70 was published in March. His mission is to educate people to informative decisions on their own. He also has experience in the mortgage industry as a loan officer and works as technical consultant creating e-commerce collaboration tools.