Credit Card Interest

Credit Card Interest

By Alice Keeler

Multiple Choice

What is your balance on the credit card?

• It is not a real word

• The amount of interest you owe

• How much total money you owe on the credit card.

• if you stand on the card you do not fall off

Multiple Choice

Credit Card Interest

• Is the amount of extra money you pay to the credit card based on your balance

• The total amount of money you owe the credit card company

Multiple Choice

If your credit card has a 27.99% interest rate what is this as a decimal?

• .02799

• 2.799

• 27.99

• 0.2799

Credit Cards

If you pay off the balance each month you will not pay interest.

Multiple Choice

In January I charged $4567 to my credit card. I paid the entire balance of the card in December. I paid the entire balance on the January statement. If the interest rate is 27.99% how much interest would you pay?

• $5845.30

• $0

• $1278.30

• $127,830.33

If you do not pay off the card you pay interest on the balance

The balance is how much you owe.

Multiple Choice

What is the interest on $345 if the credit card interest rate is 27.99%?

• $9.66

• $96.57

• $9656.55

• $441.57

Remember a perCENT is per 100. Divide the percentage by 100.

​

Multiply the balance by the percentage as a decimal​

Multiply the Balance

Calculating Credit Card Interest

Obviously... if you pay some of the balance you would end up paying interest on the remaining balance.

If you do NOT pay off the balance

You pay interest on all new charges!

You will pay interest on the balance you did not pay.

You will pay interest on each purchase

Until you pay off the balance. ​

Some text here about the topic of discussion

Truth: Credit Card interest compounds DAILY not monthly. So multiplying the balance at the end of the billing cycle will be too low. You need to DAILY multiply the interest rate so that you end up paying interest on your interest.

NOTE: Credit Card Interest is MUCH MORE complicated than what I am presenting. For the purpose of introducing the idea we will assume you pay interest on the balance

To keep it simple

Multiply the ending balance by the interest rate to calculate the interest you pay.

For now... later we will use a spreadsheet :)

Multiple Choice

In January the balance on the card was paid off. In February I charged $700. I paid off $50, the minimum payment. In March I charged $300 and then paid off the entire balance. How much interest do I pay?

• $0

• $265.91

• $279.90

• $26591

• $1215.91