How Credit Card Interest Is Calculated [You’re Paying WAY MORE Than You Think!!!]


credit card interest there are a few
things people understand less and in this video you’re going to learn how
that 12 to 15% credit card you’re carrying around in your wallet is
actually costing you more like forty to fifty percent in interest every month
and be sure to hang around for a resource that will show you how to pay
off all of your debt while building you a stockpile of tax-free cash with the
same dollars at the same time now if paying off all of your debt and building
tax-free wealth with the same dollars at the same time sounds good to you then
you’re going to want to subscribe to our Channel and click that Bell so you’re
notified when we post new videos simple fact those 12 15 and 18 percent
credit cards they’re costing you up to 50% or more in interest every month
hi I’m best-selling personal finance author Tony Manganiello since 1995 my
business partner John communi and I have taught over 3 million people how to
eliminate all of their debt save thousands of dollars in interest
payments and accumulate real wealth all with their current income and in this
video you’re going to learn 3 cashflow secrets that will reveal how much
interest you’re really paying every month on those little plastic parasites
and when you do you just might want to get rid of them once and for all
the first cashflow secret is that credit card debt is very different from other
debts like you know the debt you have on your car or your mortgage. Debts like
your car or your house payment they are debts that have a fixed payment
based on an original dollar amount that you borrowed and this is an amount that
cannot be increased after you’ve signed on the dotted line and payments are made
for a specific time frame like you know you’ve got that five year car loan or
your 30-year mortgage once you inked that deal you have a set payment for a
specific period of time and that’s it a credit card on the other hand has a
credit line or a limit that you can borrow against whenever you want to and
that balance Canon does change anytime depending on how you use it because the
credit card company can’t anticipate when you’ll add to the balance of that
card your payment and interest have to be calculated each month based on a
balance that changes from day to day and for month a month and these are the
calculations that lead to very different scenarios for instance if you borrow 20
grand to buy a car and you get a five year car loan at 8% your payment will be
about four hundred and five dollars and 53 cents a month this means you’ll make
sixty payments of four hundred and five dollars and 53 cents each and you’ll pay
a total of twenty four thousand three hundred thirty one dollars and 80 cents
that’s forty three hundred and thirty one dollars and eighty cents in total
interest if you have a $20,000 balance on a
credit card with the same 8% annual interest rate and the same payment of
four hundred and five dollars and 53 cents it could take you almost 28 years
to pay that little plastic parasite off and you’d pay about nine thousand six
hundred sixty dollars and 38 cents and interest almost six times longer and
more than twice the interest the very same numbers but very different results
that can have a significant impact on your wallet
the reason these results are so different is because loans like a car
loan or a mortgage those are simple interest loans a credit
card is revolving interest the revolving interest has very different calculations
than simple interest us and they generate very different results do me a
favor and let me know in the comments if you’re surprised by these numbers are
you surprised that a car loan and a credit card with the same balance the
same interest rate can generate such different results cash flow secret
number two has to do with how credit card interest is calculated there are
two numbers you need to calculate how much interest you’re charged on your
credit card the first is the APR or annual percentage rate I use an 8% rate
in my previous example but the typical APR on a credit card can range from 12%
all the way up to nearly 30 percent so let’s use an 18% APR in this example the
first step to calculating the interest on your credit card is to divide your
APR by the number of days in a year 365 this will give you the daily finance
charge rate so 18 divided by 365 equals point zero four nine three two percent
or point zero zero zero four nine three two but this is where it begins to get a
little tricky remember I said that the balance can change at any time this is
because you can use the card for any purchase that accepts it as a mode of
payment at any time during the month for any amount that doesn’t exceed your
credit limit what the credit card company does is it takes the average
daily balance and multiplies the average daily balance by the daily finance rate
in our example with a $20,000 balance if that was the average daily
balance on a 30-day month the equation would look like this
$20,000 times the daily finance charge or point zero zero zero four nine three
two times the number of days in a month or thirty days for that month and you
get two hundred ninety five dollars and ninety two cents in finance charges for
that month but the real equation doesn’t stop there
the real equation continues with cash flow secret number three cash flow
secret number three is how the credit card company determines your monthly
payment and this right here is the wild card just think about this for a second
you’re using your credit card each month you know just to make different
purchases here and there and you’re adding to the balance throughout the
month knowing you’re going to make a payment when the payment time is do you
check your statement and you have a balance and a minimum payment what do
you choose to pay most people make a payment based on the minimum payment and
don’t think twice about it and that is where they’ve got you the minimum
payment on a credit card is also based on the balance just like the interest
charge remember our twenty thousand dollar credit card with the 18% interest
rate in my experience working directly with thousands of people I’ve seen
credit card payments range anywhere from two to four percent of the outstanding
balance so let’s use three percent in our credit card example with an eighteen
percent annual APR with the twenty thousand dollar balance three percent
times twenty thousand dollars is a $600 monthly payment but remember this card
had a monthly finance charge of two hundred ninety five dollars and ninety
two cents so two hundred ninety five dollars and ninety two cents of your
$600 payment is being applied to interest that’s forty nine point three
two percent of your payment lost to interest while the credit card company
magicians are waving their hands all around the 18% APR you’re missing the
fact that almost half of your payment is being lost to interest and just so we’re
clear interest is profit for your credit card company
is just one reason why you bust your butt every day every month every year
and you can’t understand while you’re not getting ahead what you’re not
realizing is that your money is working really really hard but unfortunately
you’re not the one that’s working hard for now if you want to change that and
get your money working hard for you then you need to click the link and get your
hands on the banker secret to permanent family wealth by my business partner
John commuter it will walk you through how you can pay off all your debt and
build tax-free wealth with the same dollars at the same time and that’s how
you get your money working hard for you and building wealth for you and your
loved ones instead of the credit card companies I hope you found this
information helpful I know that money topics can be you know they can be
pretty intimidating so if you’d like to see me break down the numbers on a
financial topic that has you scratching your head please let me know in the
comments I love helping you understand how the numbers work and when it comes
to money if you don’t understand how the numbers work then those numbers will
look probably working against you and that’s the reason why you feel like
you’re spinning your financial wheels helping you gain financial traction is
what I’m here for thanks for watching and I’ll see you
next time

Paul Whisler

7 Comments

  1. Thanks for watching "How Credit Card Interest Is Calculated [You're Paying WAY MORE Than You Think]… please let us know if this video helped you understand how credit card payments and interest work.

  2. *I've been depressed and almost lost my car due to my credit card debts and loans until I connected with ruma_telecom11 on !nstagram, he helped fund my account and no upfront fee, I'm so glad

  3. I've been depressed and almost lost my car due to my credit card debts and loans until I connected with ruma_telecom11 on !nstagram, he helped fund my account and no upfront fee, I'm so glad

  4. I lost my Credit Card and I thought I lost almost £40,000 but when I was introduce to [email protected]_COM he voluntarily help out and am able to recover my card also my £40,000

  5. I guess I'm most surprised by the difference in time it takes to pay off both. I'm definitely going to get rid of mine ASAP.

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