The Motley Fool Discussion Boards

Previous Page

Personal Finances / Credit Cards and Consumer Debt


Subject:  Re: The Power Of Compounding Date:  2/5/2013  9:19 PM
Author:  vkg Number:  306764 of 312189

'Every month your Balance and outstanding Interest are used to calculate the interest that we will charge you.,

This isn't as bad as it first appears. Interest is based on average daily balance. As a billing period closes, interest is posted to the account. It now adds to the average daily balance.

The closer the payment is made to the start of the billing cycle, the less "compound interest" paid.

The minimum payment is required to cover interest, fees, past due amounts, and some principal (around 1%?).

As long at least the minimum payment is made, interest is paid each billing cycle and there is no negative amortization to accumulate compound interest.
Copyright 1996-2018 trademark and the "Fool" logo is a trademark of The Motley Fool, Inc. Contact Us