Credit card noob with a question

[Kilhart]

Okay so I went through 20 years without a credit card (always stuck with the debit card) and finally caved and got one, but I'm a total noob at it. I read this in the almighty Wikipedia:

"if a user had a $1,000 transaction and repaid it in full within this grace period, there would be no interest charged. If, however, even $1.00 of the total amount remained unpaid, interest would be charged on the $1,000 from the date of purchase until the payment is received."

Now, I know Wikipedia is well, Wikipedia, but the whole "until the payment is received" thing irks me. Is it basically saying that if you don't pay off the entire purchase with interest, interest will continue to be charged on the $1000 and not the remaining balance? I.e. if I bought a car on credit for $15000 with a monthly interest rate of 3% and paid $14000 of it off, I'd be charged at least $450 in interest every month on that purchase alone until the entire balance+interest on the purchase was paid off?

I dunno, it confuses me. I always thought interest was based on the total balance remaining, not some bullshit original price of purchase. <_<

[Omnipotent]

Quick question, what CC did u get. Having a hard time getting a CC ANYWHERE and I am 20. No credit history, and have failed applications to everyone place known to man. + no debt to my name.

[Qalbert]

that does indeed sound like bullshit, if its your card's policy. If you are buying something on a store's credit line that would make more sense, but as far as I know interest is based on balance. maybe I'm wrong, I've had mine for less than 6 months.

[Kilhart]

I applied for the MTVU Student Citi Card. My friend recommended it to me since it was his first card and apparently you're basically guaranteed approval if you're a student, even if you have no/bad credit. I have no debt aside from deferred student loans, and I was approved for $2500 with the 0% APR for 6 months.

[Shalyn]

It's true: 1.You could be charged a lot of money for even a penny off 2. It's bullshit, but it's how they work

[Ksandra]

Okay so I went through 20 years without a credit card (always stuck with the debit card) and finally caved and got one, but I'm a total noob at it. I read this in the almighty Wikipedia:

"if a user had a $1,000 transaction and repaid it in full within this grace period, there would be no interest charged. If, however, even $1.00 of the total amount remained unpaid, interest would be charged on the $1,000 from the date of purchase until the payment is received."

Now, I know Wikipedia is well, Wikipedia, but the whole "until the payment is received" thing irks me. Is it basically saying that if you don't pay off the entire purchase with interest, interest will continue to be charged on the $1000 and not the remaining balance? I.e. if I bought a car on credit for $15000 with a monthly interest rate of 3% and paid $14000 of it off, I'd be charged at least $450 in interest every month on that purchase alone until the entire balance+interest on the purchase was paid off?

I dunno, it confuses me. I always thought interest was based on the total balance remaining, not some bullshit original price of purchase. <_<

every cc has whats called a "grace period" it varies so you'll have to look at your user agreement, but I think the average is 14 days. What it means is you have 14 days that you can pay off a purchase and not get any interest on it.

for example, say you charge a 10$ pizza on your card, and two days later pay that 10$, you will not have to pay any interest on the pizza.


however if you were to only pay say 4$, then when your billing statement comes you will have interest on it for the full 10$ vs. 6$.

[archibaldcrane]

That doesn't sound right, I don't think that's how it works.

I'd just call the customer help center for your card and get clarification - don't trust something as general as wikipedia for something that is going to be specific for your card (although I'm pretty sure they all operate similarly). I've had a credit card for 11 years now, but I always pay it off every month, don't really know how the interest works

edit: welp, guess I'm wrong, accd. to the two posters above me, disregard this, i suck cocks.

[Ksandra]

that does indeed sound like bullshit, if its your card's policy. If you are buying something on a store's credit line that would make more sense, but as far as I know interest is based on balance. maybe I'm wrong, I've had mine for less than 6 months.

all CC do this, it's pretty standard.

[Kilhart]

every cc has whats called a "grace period" it varies so you'll have to look at your user agreement, but I think the average is 14 days. What it means is you have 14 days that you can pay off a purchase and not get any interest on it.

for example, say you charge a 10$ pizza on your card, and two days later pay that 10$, you will not have to pay any interest on the pizza.


however if you were to only pay say 4$, then when your billing statement comes you will have interest on it for the full 10$ vs. 6$.

I understand this part, but say that $6 balance carries over to the next bill (ignoring minimum payments for the sake of the situation). Would the interest for THAT month still be based on the $10?

[_chuchu]

The most powerful force in the universe.

You don't wanna know how it works, just keep paying it off

[Omnipotent]

I applied for the MTVU Student Citi Card. My friend recommended it to me since it was his first card and apparently you're basically guaranteed approval if you're a student, even if you have no/bad credit. I have no debt aside from deferred student loans, and I was approved for $2500 with the 0% APR for 6 months.

Just applied, I am a full-time student. So let's see how well this goes.

[Kilhart]

The most powerful force in the universe.

You don't wanna know how it works, just keep paying it off

Well the main reason I ask is because I pretty much got the card to pay off a $2000 debt that just popped into my life due to my previous school revoking some of last year's financial aid, meaning I had 2 grand I had to pay immediately, instead of having it on the loan. I'm also maxed out on my upcoming federal loan for 09-10 and my parents refuse to sign for any extra money on the Parent PLUS loan. I'm planning on taking advantage of this 0% APR for 6 months to try and pay off the $2000 with as little interest as possible, but if I end up with a $50 balance by the end of the 6 months and still get charged interest based on the $2000, I'd rather bust my ass more and pay it off before then.

Just applied, I am a full-time student. So let's see how well this goes.

Good luck. It took me about 3-4 days to get approved, I think.

[_chuchu]

Run a tag search on credit. You may also wanna check out this thread

[Ksandra]

I understand this part, but say that $6 balance carries over to the next bill (ignoring minimum payments for the sake of the situation). Would the interest for THAT month still be based on the $10?

cards have different ways of calculating remaining interests.

the most common afaik is the average daily balance.

They will take the daily balance throughout the month on the card and base the payment for each day. So no, you shouldn't have to keep paying for 2000$.

I would call customer service to clarify on that though, because it does vary from card to card.

[_chuchu]

I certainly hope you've got some kinda income from work or something to help pay off short-term debt

[_chuchu]

When I called customer service, they didn't want to tell me how much the interest is, but you can use excel to calculate how much it is. Also, what other people have said, and that is, to read the agreement you signed

[Kilhart]

cards have different ways of calculating remaining interests.

the most common afaik is the average daily balance.

They will take the daily balance throughout the month on the card and base the payment for each day. So no, you shouldn't have to keep paying for 2000$.

I would call customer service to clarify on that though, because it does vary from card to card.

Alright, thanks. Would be a bitch if it was based off the original $2000. D:

I certainly hope you've got some kinda income from work or something to help pay off short-term debt

Yessir

When I called customer service, they didn't want to tell me how much the interest is, but you can use excel to calculate how much it is. Also, what other people have said, and that is, to read the agreement you signed

The agreement only mentions average daily balance used for calculating total finance charges. Are finance charges separate from the APR they charge you, or is it the same thing? My friend told me it was separate and confused the shit out of me even more.

[chazzyphizzle]

Just saying, CC companies are legally obligated to quote you your interest rate. No getting shifty with it, man up and demand it.

[Aerides]

Your CC is basically saying "If you don't pay in full by the due date, oh hey I guess you don't want a grace period so hello interest for the whole thing".
Basically, grace goes out the window if not officially paid in full.

Now, the 2nd month, if only 1c is left then the interest can only be on the 1c, but for the first period the avg daily balance thing will apply, not only on the 1c left.

Also, if you are already carrying a balance, and make new charges, and then still don't pay in full, there may not be a grace on the new shit either and it all starts ticking from day 1.

Rules are different for different customers with most CC's, tiered pricing etc. Given you are a new CM with them chances are you are getting avg. rip offs.

Confusing? It's supposed to be. Just pay in full, or prepare to get shafted when you do have to carry a balance and go for the lowest rates you can find.

Another tip on paying, while it's nice to arrange for your bills to go thru your bank you will be adding 1-2 days through this process (electronic, we're not talking writing checks here). Get signed up on the PayOnLine w/e thru the CC in advance so you can pay and know it counts same business day and never worry if it really got there.

[Snprphnx]

Fine Print. Read it. Know it. Hate it.

Credit Card companies are sneaky as fuck, and will make up rule upon rule to get as much out of you as they can. I had a Best Buy store card last year. Most bills that allow you to pay online, you can pay on the due date by a certain time, typically 5pm EST. However, this Best Buy card, payment had to be set up 48 hours in advance, even when paying online. So when I went to pay on the due date, I had 3 options, 1. set up a normal payment, and have it be late, thus losing my 0% financing; 2. set up an emergency payment, keep my 0% but pay a $20 fee; or 3. call in the emergency payment, and not only get charged the $20 fee, but also an additional $3.50 for paying by phone.

This kind of bullshit is what is wrong with these companies. Hell, Dell Computers conveniently lost my last payment, didnt contact me about it, and turned 0% to 29.9% and let it ride for 9 months before I was contacted by a collection agency. Had to take them to court over it, cuz 9 months worth of 29.9% had that last $100 payment to go up to over $1000.

Its honestly best to stay away from them and buy only what your bank account can afford