Are you looking for a way to get a sense of how much interest charge you’ll be charged on purchases you make? Here are some tips to help you find out.
Calculating interest charges on purchases
When you use your credit card, you are not only charged for the purchase but also for interest. The amount you pay on your purchases can snowball into a huge bill if you don’t pay off the balance each month. This is especially true if you are carrying a large balance. However, there are steps you can take to avoid paying interest on purchases.
Many credit card companies have a grace period that allows you to pay off the balance without incurring interest. If you don’t qualify for this, you can make an arrangement with the company to reduce your monthly payment amount. Some cards also offer an introductory APR, which means you will be able to keep your balance at a low rate for a few months. But don’t expect the introductory APR to last for a long time.
You can calculate your interest charges based on the average daily balance. This method involves adding up all your debit entries and dividing them by the number of days in your billing period. For instance, if you made a $100 purchase on your card and the billing cycle was 30 days, you would have an average daily balance of $80. Adding this amount to your annual percentage rate (APR) and then dividing it by 365, you will get a daily rate.
Avoiding interest charges by paying with cash
There are several ways to avoid credit card finance charges and one of the most effective is to simply pay in cash. While this may not seem like the best option, it does mean you will not have to worry about getting stung by the finance fees. In addition, you can put your hard earned dollars to better use. Paying for groceries or a car repair in cash is a lot more cost effective than carrying a high balance on your credit card. Plus, you don’t have to worry about paying those dreaded interest fees!
Another way to get the cash you need is to take out a payday loan. These loans are usually more expensive and come with an even higher annual percentage rate.