How Credit Card Interest Works - What is APR on a Credit Card & How Are Rates Calculated / Applied?

[@ProudMoney]

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[@davidcsmalley]

Incredibly easy to understand. This video should be required curriculum. Excellent work.

[@terencejohnson9781]

By far the best explanation of Interest Rate v APR. Thank you!

[@jonathanhamm7262]

Best one I’ve seen yet by far on explaining apr

[@moneybee]

Really great video! Credit cards are amazing tools for travel hacking and to accumulate points, but you certainly need to be aware of their dark side, and avoid high interest debt! Great overview... and even GREATER Andy Warhol shirt! Love it!

[@BoxCatKeys]

Wow, been using a CC for over a decade now. Still picking up new tidbits about how it works 😮 Crazy how interest builds from fresh, new purchases just because you’re carrying a balance over from a previous month. Best just to manage and pay the statement balance on time and in full and avoid the headache entirely. 👍🏻 great vid, thanks

[@trinabobina7674]

Thank you for this, I feel so dumb for not knowing already but just racked up a huge bill this month on my credit card and trying to figure out best way and when to pay it off

[@qkun]

This was very helpful! Just got my first interest charge and i was so confused lol, first time credit card owner. I'm still learning! Good thing I caught it now moreso than later. Definitely need to change the way i pay off my card but again thank you for the clarity!

[@whatislifebuttheenjoymento3405]

In other words this credit cards make money off of people fucking up and not paying on time,

[@thatfast3002]

You explained it on a way that easily made me understand it

[@evanweyer1808]

I've always paid my balances off in full and this is the first time I won't be able to pay it off in full and was thinking my APR meant I'd get charged that 20 plus% each month... Heck I can handle a 1- 2% interest for the next month... In the back of my mind I was thinking there's no way people with credit card debt get charged 20% each month lol

[@DarelJettSmith]

You articulated on this perfectly. I bet a child could understand this with how well you explained it haha

[@kerronjdavis1945]

This was explained very well excellent job

[@ProudMoney]

Thanks!

[@foreign_squad]

I’m watching this because I’m thinking about getting a credit card to start building my credit and this video is very helpful 😊

[@carlosalanderos]

Thank you sooo much! For dumbing this up for me. I swear i got in a ball park what it mean for apr charge but now you cleared it for me and i thank you so much. Thank you!!! Great video!!!

[@nathankeel4308]

So if I have it setup to autopay the full statement on the due date, I will not pay any interest right?

[@roseyrose_jadiebelle]

My bank manipulated the closing date and extended it further to include more spending

[@ChiBliss7]

Thank you for this. This made everything simple

[@tosinakinyemi3948]

Thank you so much for clear explanation.

[@FloridaSalon]

Thank you! At the end of most videos I still had no idea how the interest rates equate to my cost.

[@zirwolf5010]

This video was perfect man, all my questions were answered. Good job 👍🏾

[@kent.anagor]

Thanks for the vid homie. I appreciate it. You broke it down really well, keep on 👌

[@bookbearerplus]

Excellent walkthrough, thanks!

[@DysVeteran]

thank u sir. I love math so this was very clear to me

[@mctrucks8825]

So helpful. Thank you so much lol I am very reluctant about getting a credit card because I don't want to mess the little bit of credit I have completely up

[@sonic1k]

We can't forget the late fees.... Thats how they gouge your eyes out

[@TPXcruises]

Great information 🙏🏾 big thanks! 💯

[@jenniferherrera7216]

Thank you! I appreciate it. This information is exactly what I was looking for.

[@riverios5334]

So much help! Thank you!!

[@dannydavidson6588]

Nope still confused. What Im getting is even if you don't use the card you gotta pay them?? The more I look up information the more confused I get and im like ready to cry

[@BoxCatKeys]

Some CCs require a fee to use. Bigger spending means bigger rewards, theoretically. Reading a specific card’s benefits and comparing multiple cards goes a long way in better understanding this concept

[@se0271]

APR has nothing to do with that. The thing I think you're concerned with is Annual Fees which is how much you pay for having the card period. It's like a subscription (paying 10$ a month for Netflix, for example). It doesn't matter whether you use your card or not, just like it doesn't matter if you watch Netflix or not. You're still paying that 10$. The good news is some cards have no annual fees which is the best bet if you're starting out. You won't pay anything, even if you don't use the card. It could actually benefit you if you keep that card open, even if you don't use it, because it comes with a credit history. Using it once or twice a year and paying that back in full is going to boost your score. APR, the topic of the video, is what you pay (interest) if you miss paying off your card each month. Don't worry about APR if you're confident you're going to pay off your card on time.

[@jj_4430]

Amazing vid

[@spencerkincaid3465]

Very practical and useful info. Much appreciated

[@wiilover07]

Interest is highway robbery. But to be clear if I pay the minimum payment what I pay doesn't fully go back onto the balance? Only part of it does? I asked this on another video talking about interest rates.

[@Eman47111]

Thank you, very helpful

[@HangNguyen-ih8rf]

I just got an offer from Amex at 4% for 9 months so I plan to put 1k on that card and let it roast for 8 months without using that card again...hopefully could pay it all off on the 9th month. How much interest am I paying each month? Thank you. Never have to carry a balance in my life till this pandemic!

[@mitchell.9632]

Thanks for the details. Trailing interest is a thing. And minimum interest fees too.

[@meredithsickel2709]

So I have a credit card, and I paid the balance off every month according to my statements, I’ve not ever been charged even a dime of interest. Here’s the thing though. I have a bill that set up on auto pay to pay every month out of that credit card and the due date that bill has just so happens to be the day before the cut off date of the of my credit card statement. so even though I paid balance off every month I also carry a balance over every month because of that payment. So how come I’ve never been charged any interest? Obviously, the fact that it was only charged one day prior. Has something to do with it. But how does that all actually work?

[@joshlovern756]

Awesome video!

[@vaGin0]

Why don’t they teach us this in high school 😐

[@jeremiahashford4639]

If they did, they wouldn’t make any money.

[@tietree549]

We have the internet now kiddo

[@happyjuice4251]

bro where did you go to school? This is basic algebra

[@BoxCatKeys]

@@happyjuice4251 A general introduction to finance / money management should be in the core curriculum, but they’d rather teach cursive and CRT.

[@happyjuice4251]

@@BoxCatKeys cursive????! we gotta teach em how to write english first

[@briangonzalez1964]

Very helpful!

[@macnosmutano4849]

You can't blame banks for when you fail to make a payment guys. Not knowing how credit cards work is no excuse.

[@BigDaddyCapo]

Shouldn’t be buying something or getting something you know nothing about.. this goes to every principle in life even for little things such as ordering food you have no idea what it contains and then getting upset you dont like it and can’t get a refund

[@integritymerk8349]

I agree with both of you but if you grow up with parents who are careless with their money and have no good money habits, meaning you wouldn't get taught how to actually manage your money let alone a credit card

[@Eliezer4433]

Makes sense, great video!

[@honglytech]

What is the purchase rate? Is it a rate we have to pay monthly or annually?

[@irvinjramos]

I wish USA had like Mexico they give you months with paying interest depending on your purchases but you can get up to 24 months with out paying interest

[@moabushanab4023]

Great video

[@EddiesCustomsandRestorations]

excellent video! thank you!

[@tezt3740]

thanks very good info!!

[@Leandre22_02]

Wait so you pay your bill in full but can you still use your card during the grace period wouldn’t those purchases go to the next billing cycle because once you pay your statement balance the balances you charge in the grace period you don’t pay until the due date is over correct?

[@ursoulspure]

Thumbs up for Warhol alone :)

[@readyforanything3]

I’m a bit confused on the math, so 24/365= .06575 but when we calculated that against the principal balance the calculation in the video was (1000x .0006575) why were the added zeros there? When i do the math of 1000x.06575 what the daily interest was, it becomes 65.75 a day then multiplying that by 31 gives me over 2k, i know I’m incorrect i just want to understand why the zeros were added in order to grasp this fully. I’m missing or forgetting something mathematically

[@readyforanything3]

Somebody answered in the comments, i forgot to change something into percent you have to divide it by a hundred and now i feel like a dumbass, gonna leave the comment up so y’all can get a laugh or two

[@chew7760]

Hi, according to what you have explained "if we have revolving balance, we will be charged interest for the credit card right?" How about like this? Let says our billing cycle is 15/8/2024-16/9/2024. And our payment due date is 10/10/2024. We are having $1000 of statement balance, but we have relvoved balance of $500 in this statement. My questions is can I avoid the interest by paying the full payment on 16/9/2024 in order to do not let the revolved balance of $500 get charged for interest? So that my statement balance can be cleared and 0 interest will be charged. Does this works?

[@dani_lbrl]

I just dont get where did the “ 0.0006575” came from. Like where the hell those 3 extra cero’s came from. This is why I hated math class

[@BEYONDTHYSELF1]

my exact thoughts

[@kukado3856]

By converting percent to decimal: 0.06575 is a percentage = 0.06575%. In order to get it in decimal form, you will need to divide it by 100 = 0.0006575.

[@judithvr3087]

The golden rule is to pay all the statements in full by the due date, and there will not be any interest in your account. If not, be sure you owe that.

[@k10boy50]

So if I pay off $500 out of the $1,000 on day 2, my average would be much lower by the end of the month correct? Because I only have $1,000 the first 2 days and have $500 the remaining 28 days.

[@bruhs4621]

Yes

[@Garrycamden]

Great info as always. I do have an off-topic question. I have a secured card that I have had for about 17 months, they say they increase the limit after a year, but haven't received one. They don't take requests. Do you think its because they don't make money off of me since I don't carry balances? If so should I carry a small balance? Sorry so long.

[@lisacastano1064]

Try capital one.

[@MoMo-00]

No, do not carry a balance. That's not what you need to be doing. Which bank is this?

[@atrickalenzu4129]

What about periodic finance charge, I get confuse with this and Principal payment, can you explain this or make a video

[@Steve-bm2zm]

What happens if you have a statement balance of 1000 but you only pay 999 and it’s the first month using how is interest charged for your next bill?

[@ramjanali-zm4xz]

Nice information

[@diving.deep.]

Wait. Sooooo pay off your balance anyway? The sooner the better ? Make sure the balance is 0 when the cycle ends ? Twice a billing cycle so it doesn't hurt out wallet so much , I'm guessing ?

[@aramisgarcia8712]

Thank you

[@clippdiaz7015]

I used my credit card like a debit card now. I stayed 1% utilization all my credit cards...

[@seniorchiefkeef]

Great video! Start from $0 to get 30 days of no interest. 30 days interest free loan! 👍🏽👍🏽

[@ChristineGrant-yl8dk]

Is the interest they charge you in the grace period use the daily balance still… so if i charged something in the grace period it ups my daily interest rate?

[@PedroLopez-qu8wt]

My girl paid off her Amazon credit card before the due date and she got hit with interest and when she reached out they told her that interest was charged daily

[@Wangchung405]

Dats fucked up

[@Leandre22_02]

Yea auto pay is the way to go

[@overworked30]

me: Hey siri what is 24% of 1000 siri: its 240 me: hey siri whats 240 divided by 12 siri: that would be 20

[@DiegoSalazar-uf1js]

What is residual interest?

[@aliakbari9231]

I am still confused. So, if my billing cycle is 20th of every month and the deadline for paying the statement is end of the month, the purchases I make 20~31 falls in the next billing cycle. So, when I am paying the statement, the current balance is more than the statement balance. If I only pay the last statement (not the current balance), will the APR be incurred on the difference? If the answer is "No", it means, in case of not paying the statement fully, the APR is going to be incurred on a fixed amount which is the previous statement. I do not understand the "Average Daily Balance" in the story.

[@NirvzHD]

Charges only accrue during each billing cycle, but you can accrue interest during your 'grace period' - 20th to 31st of each months for the next billing cycle. Example. October 20 - November 20th you accrue a balance of 1,000 dollars. You can only pay 750, so you pay down the debt to 250 dollars on November 31st, the end of your grace period. Since you rolled a balance into the November 20 - December 20th billing cycle you accrue interest every day on any balance between November 20th and December 20th - the 250 dollars plus anything additional you purchase on the card. The companies charge you the small daily interest rate each day you carry a rolling balance. It's not necessarily important to understand the numbers unless you frequently carry a rolling balance. It's important to remember that a credit card is a LOAN and NOT free money. Paying the 'statement balance' and not paying off a card in full will begin a rolling balance and then they start collecting interest.

[@misaa.4223]

When going to pay your credit car bill online, is it better to pay 'Minimum Balance, 'Last Statement Balance', or 'Current Balance'? Will paying off a certain one (i.e. last balance vs current balance) affect the interest rate after payment?

[@michellegomez5429]

It depends on how much you want to payback a loan. Paying the minimum you will always pay interest and carry over a balance. Paying off the statement balance no interest if you have always been a transactor (a person who pays off the balance every month). Current Balance, is a total balance of all your transactions including your statement balance with current charges, (current charges will be on your next billing statement) pay that off, no interest if you have always paid on time and paid off your balance in full each month. If you ever carried over a balance and then the next billing statement you decided to pay off the full balance always ask an agent how much it will be to pay off my full balance because they will give you the correct amount with the interest included. if you are a person who carries over a balance you will be charged a residual interest. Your residual interest isn't in your current balance depending on when you make the payment in full. Residual interest occurs when you carry over a balance and/or keep carrying over a balance and then you decide to pay it off. Ex residual interest: Residual interest occurs when your last statement being issued and the date when your full payment reaches the company. You can pay as much as you like in your billing cycle to get your balance down so your interest won't be as high as well..

[@misaa.4223]

@@michellegomez5429 thank you so much!! So helpful :)

[@yahshuayahudahbenyisreal1061]

wicked legal crooks

[@vanylaskywalker]

Do you have to pay "before" or "on the due date" to avoid interest? Meaning if due date is September 13, you have to pay by September 12, 11:59pm or September 13, 11:59pm?

[@561jitt]

Yah this alr is makin me crazy😆

[@huntermckinney1197]

Have it scheduled a few days before Sep 13th if possible. So the payment can process, especially if the due date falls on the weekend/holiday

[@pinkiepie1656]

I like to have the payment "cleared" by the due date. And some card companies require the payment to be made by 8pm on the due date, not 11:59pm, so be careful:)

[@matthewJ142]

Wow and I was here thinking it was 26% of the current balance. I was like that's a lot of interest and I don't even have a $1000 balance 😂 and I was worried.

[@katieswiger17]

im struggling with how to get my interest rate down. im new to this, never been taught! so mine is just a litttllee high. when you said, “revolve balance… and interest is charged” .. when interest is charged and you pay all of that off, does doing that drop your interest rate? basically what I’m asking is what are the benefits of doing the whole “revolve balance” thing ?because I’ve heard about that plenty of times!! just curious

[@Shadowlessday]

There are no benefits to a revolving balance, it is a bad thing that you want to avoid. Having a revolving balance means you're paying extra money to the credit card company in addition to the purchases you make with the card, it's basically money going down the drain. The goal is to pay off your entire balance by the due date so you have no revolving balance, that way you don't pay money other than the purchases you made with the card.

[@zxnuc]

OK so i have a credit card balance of $17,000 with 22.24% interest rate and i can pay this off buy selling my Honda HRV with 25,000 miles on it to carvana which they will pay me $18,000 for it. Now on the other hand I can buy a new Tesla model Y which they are running a promo of 0.99% APR for 60 months. Vehicle amount is $42,990/destination fee 1,390 / order fee $250/minus instant federal tax credit of $ 7,500 for this EV car . Total of $37,130 plus tax and other misc small charge. My question is. Will i get big savings out of it if when doing this since the car has a very low interest. Thank you. Need your answer asap please. Or what is the best strategy to do. Reply

[@jonb5668]

Yes. You need to pay that credit card off asap. The Tesla payment would be $666 per month and after 5 years you will have paid $1000 in interest. If you put $666 per month towards the credit card balance you could pay it off in 3 years, but you would pay $6,236 in interest.

[@zxnuc]

@@jonb5668 thank you. That’s also what I was thinking and calculating. I’m glad you agreed

[@berlynfigueroa6981]

Why dont i understand yet😭

[@moabushanab4023]

$6000 !!!! interest rate 30% how much it will be I am using capital one thank you

[@OliCopeland]

he's literally explained it... just use your figures and follow the method he's shown

[@markzc6236]

Pay it all off in full RIGHT NOW. You are not ready for a credit card!

[@cognac8297]

Take your 30% or what ever your interest is on that card . The apr, divided by 12 that's your monthly interest rate multiply it by your 6000. That's your monthly interest rate on six thousand . Divided by 365 is your daily interest..

[@BobbyBrown-g7b]

I'm new

[@franciscomtz88]

I swear these credit card interest rates are just like your toxic ex girlfriend

[@vkhem3599]

👍👍👍👍👍

[@g.s.d781]

I’m confused, so I need to pay the current balance instead of the the statement to avoid interest charge?

[@HGHONDO]

Yes, however if you were carrying a balance then you will still have to pay the interest that accrued which will be billed to you on the next statement. Bottom line is NEVER carry a balance otherwise you are incurring interest rate costs.

[@newbeginnings9457]

If you pay off current balance when you get the bill you will never pay interest! What is so difficult about this concept? That’s why people get in trouble with credit cards!

[@BEYONDTHYSELF1]

9:38 - 11:27 says differently ??

[@Leandre22_02]

You have to pay the statement balance at the due date you can pay your current balance down to we’re you have a lower utilization but never pay the minimum payment by the due date your gonna be racked up with interest charges.

[@projects2progress518]

As for subscriptions after leaving a nugget behind not off the bat👾

[@dr.mohamedaitnouh4501]

These credit cards are a ripoff. My goodness on every $1000 you pay $30 every month (if the interest rate is about 30%) ... so if you have $20000 credit then you would pay 20x20 = $600 every month and this is not reducing your credit balance. Which means this man just saved my life and woke me up. Thank you, Sir! May god bless you for this information easy to understand.

[@meredithsickel2709]

Yeah, but who spends $20,000 on the credit card every month and carries the entire balance over

[@dr.mohamedaitnouh4501]

Not every month $20000 added up over two years ... bottom line credit is good as long as you leave it under 10% @@meredithsickel2709

[@pinkiepie1656]

If you're smart, you don't charge 20k to it and not pay it off

[@tonyclams1955]

Fuck it...... pay cash

[@garya6978]

And this is what should be taught in high school. But they don't. Wonder why.

[@explosivemindsllc]

Not a big math guy but interest charged daily: 24/365 = .06575 per day. Got it, but on the next clip it shows (balance x .0006575 x 31 = answer). What did you do to get .0006575?

[@ColoradoSockies]

The 0.06575 on the first slide was 0.06575% which expressed in decimal form is 0.0006575 since you have to divide by 100 to get the decimal amount.

[@yass7025]

So the interest charged per year is 24%, for math problems you have to covert the percentage to a decimal. (percent to decimal-> percentage divide by 100 or move the decimal point 2 places to the left). So 24% turns into 0.24. 0.24/365 days=0.0006575

[@angryfurbie]

Very helpful, clear and concise. Thank you!

[@mckheiziabrenica]

Amazing content 🙏🏻

[@PrinceCity007]

This was great, thank you