Krympress reports:
Credit — A convenient financial tool that allows you to pay for purchases without having cash or debit cards. But many do not think about how the interest is accrued for the funds spent from the credit card. Let’s tell you how it happens.
Preferential period
When you use a credit card, you actually borrow money. After that, each reporting period you receive an extract where the amount spent is indicated, as well as the minimum payment that needs to be made.
At the same time, almost always the credit cards have an interest -free or preferential period — the period during which you can use money for free. The main thing is to have time to return the entire amount spent on time. If this is not done, then interest will be accrued for the rest of the debt.
For example, you issued a credit card in a bank with an interest -free period of 60 days. And in two months they removed 50,000 rubles from it.
If you repay the entire amount on the 59th day, the bank will not pay you any interest. However, if on the 61st day you do not make a payment, interest will begin to be accrued for the entire amount used.
An important point: in order to preserve the grace period, it is necessary to pay part of the debt monthly, which is from 3 to 10% depending on the conditions of your bank.
The interest rate on the basis of which the monthly payment will be formed is indicated in your contract. Therefore, you can find out about its size in advance. But the exact amount of the payment will become known only on the day of the calculation: the amount of debt on credit card will depend on the lasts made.
As a rule, the client has 20 days to make a monthly payment. If you do not meet this period, then the effect of the grace period will end, and you will have to start paying interest.
Formula for calculating interest
To understand how interest is formed, use the formula:
Overpayment for expired days = a (debt amount) x (b / 100) (interest rate) / 365 (number of days per year) x c (number of days of delay).
Let’s analyze this formula in more detail.
The amount of the debt is the total amount that you must at the moment.
The interest rate is the annual rate set by the creditor.
The number of days of delay is the period for which you delayed the payment.
For example, if your debt on a card is 50,000 rubles, interest rate is 24% per year, and you delayed the payment for 10 days, the calculation will look like this:
50 000 × (24 /100) / 365 x 10 = 50,000 × 0.24 / 365 x 10 = 328.8 rubles.
Thus, as a result of a delay in payment to the principal amount of debt of 50,000 rubles, you will have to pay 328 rubles 80 kopecks additionally.
Methods of accrual
Pay attention to how the bank calculates interest.
Some credit and financial institutions begin to count from the end of the grace period. Others — from the date of debt formation.
As provided in your case, you can find out from the contract that you signed when applying for a card.
Credit limit
Some credit and financial organizations propose to set a loan expenditure limit-to protect the client from excessive expenses. You can determine in advance the maximum amount that you are ready to spend. But remember that the interest in any case will be accrued for the amount used.
Payments for delay in payment
If you do not make a minimum payment on time, the bank can increase the interest rate or add a fixed amount of the fine. All this will significantly increase the costs of paying off credit card debt.
Other costs
In addition to interest and fines for the payments made with delay, other additional costs may appear. For example, banks have the right to levy:
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commission for transferring money;
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cash rental fee;
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subscription fee for service;
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The cost of SMS notifications.
All conditions for these operations are specified in detail in the contract. Consider these expenses too to determine exactly how much you will pay for the use of a credit card.
Cashback
Some banks offer loyalty programs or cashback to purchases on credit cards. This may seem tempting, but remember that the benefits of cashback can block high interest on the used funds.
Therefore, in order to avoid unnecessary expenses, repayment of interest and fines, try to reduce the debt on the credit card on time and carefully fulfill all the other conditions under your agreement.
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