What You Need to Know About Interest Rates
For all people shop around for the best rate, there are few who have taken the time to sit down and add it all up. After all, why would you bother? The answer is that understanding just how interest rates work can help you see how important small differences in rates and payment amounts can be.
Interest Rates are Compound.
It is important to remember that what you owe is compounded ? that means you pay interest on the interest you owe from the month before. That means that if you're paying 2% per month in interest, you're not paying 24% per year ? you're actually paying 26.82%. Charging interest monthly instead of yearly is a trick to make it feel like you are paying a very low price for your borrowing.
A Thought Experiment.
Here's a question: would you rather have $1 million, or $10,000 in a savings account earning 20% per year in compound interest?
Well, let's see how that $10,000 would grow. After 10 years: $61,917. 20 years: $383,375. 30 years: $2,373,763. 40 years: $91,004,381. 50 years: $563,475,143.
So after fifty years, you'd have over $500 million?! Well, not so fast. Of course, you have to take inflation into account ? if we say inflation is 5%, then that money would have the buying power that $10,732,859 does today. Still, that's not a bad return on your investment of $10,000, is it?
That's the power of compound interest, and the way the credit card companies make their money (it's also the way pensions work, and the reason the prices of things seem to rise massively as you get older). Be very, very afraid of compound interest. Or, of course, you could start saving, and be very glad of it?
Compound Interest Adds Up.
Let's work through an example on a more real kind of scale. Let's say you have an average unpaid balance of $1,000 on a card at 15% APR.
You will owe $150 in interest for the first year you borrow. However, this amount is then added onto the balance, and interest is charged on that. The second year, you'd owe another $172.50, for a total of $1,322.50. It goes on, with totals like this: $1,520.88, $1,749.00, $2,011.35.
After just five years at 15%, you'd owe double what you borrowed. And after 10 years, you'd owe four times what you borrowed! Bet you weren't expecting that. If you let something like that carry on for long enough, you'll end up paying back that credit card for years afterwards, paying back what you borrowed many times over and still not clearing the debt. Most people don't work this out, and feel that the payments must simply be their fault for spending too much money to begin with.
One Percent of Difference.
One more thing. You might think there's not that much difference between a card that charges 15% APR and one that charges 12% APR. Let's see the difference the lower rate would make to that $1,000 borrowed for five years. Remember, after five years at 15%, you owed $2,011.35.
At 12%: $1,120, $1,254.40, $1,404.93, $1,573.52? $1,762.34 after five years. So you've saved $249.01 from that 3% difference in APR ? in other words, you've paid almost 25% less interest.
Ken Austin is the webmaster at Debt Consolidation Solutions and Credit Relief Solutions
 Google News Updated : Tue, 07 Oct 2008 02:49:07 GMT LA man kills family, himself over financial woes - Reuters
Reuters - LOS ANGELES (Reuters) - A 45-year-old Los Angeles man who was apparently distraught over money troubles shot and killed his wife, three sons and mother-in-law before taking his own life, police said on Monday. Police: Jobless father kills family, self 6 Bodies Found in California Gated Community Publ.Date : Tue, 07 Oct 2008 00:48:53 GMT Study: Using fan on sleeping baby reduces risk of SIDS - San Jose Mercury News
San Jose Mercury News - By Linda Goldston Ayde Gonzales's mother was surprised when she insisted that her newborn son must sleep on his back, not on his side. Fan use linked to lower risk of sudden baby death Sleeping With Fan May Lower SIDS Risk Publ.Date : Tue, 07 Oct 2008 02:10:32 GMT Tear gas fired at mass Thai rally - BBC News
BBC News - Police in Thailand have fired tear gas to disperse a demonstration by thousands of anti-government protesters in Bangkok. Dozens of people were injured as police intervened in the dawn protest in front of parliament. Police fire tear gas against crowd Thai police clear protesters from parliament Publ.Date : Tue, 07 Oct 2008 01:51:00 GMT Many of dead, injured in bus crash were Laotian - San Jose Mercury News
San Jose Mercury News - By SAMANTHA YOUNG AP Writer SACRAMENTO—Almost every two weeks for the last two years, sisters Mai Cha and Ge Vue boarded a chartered bus to play the slots at an American Indian casino north of Sacramento. Video: Driver Arrested After Deadly Calif. Bus Crash 8 Killed in California Bus Accident Publ.Date : Tue, 07 Oct 2008 00:42:30 GMT Lowell's status rest of the way in doubt - MLB.com
MLB.com - By Ian Browne / MLB.com Mike Lowell has yet to get a base hit in eight ALDS at-bats thus far. (Charles Krupa/AP) BOSTON -- Red Sox third baseman Mike Lowell's availability is in doubt, not just for the rest of the American League Division Series ... Hip check: Lowell is bounced Mike Lowell is off Sox roster Publ.Date : Mon, 06 Oct 2008 23:16:46 GMT Alive from New York, Fey's Palin Paces SNL - E! Online
E! Online - The John McCain-Sarah Palin ticket would love to have Saturday Night Live's poll numbers. Last weekend's show, featuring yet another Tina Fey take on Palin, scored yet another big overnight rating, NBC said. Palin may appear on ‘SNL Politics and Palin lure viewers to "SNL" Publ.Date : Mon, 06 Oct 2008 23:23:11 GMT New prenatal test may be less risky than amniocentesis - San Jose Mercury News
San Jose Mercury News - By Lisa M. Krieger Building on the latest developments in DNA science, Stanford University researchers have designed a prenatal genetic test that appears to be just as accurate - but much safer than current methods like amniocentesis - by using a ... Blood Tests Ease Search for Down Syndrome Safer prenatal Down's syndrome test found in US Publ.Date : Tue, 07 Oct 2008 02:10:40 GMT RSS Software |
PARLOT::Ebooks, Scripts,
Websites, and more... Step I - Selecting A Collection AgencySelecting a credit collection... Read More If you find that creditors are calling you almost daily... Read More A recent amendment to the federal Fair Credit Reporting Act... Read More Check 21 is the common name for the Check Clearing... Read More You've decided to apply for a Citi MasterCard, but with... Read More It is estimated that billions of dollars in delinquent commercial... Read More About Search Entries:Every time a lender checks your credit history... Read More Your credit history is an important aspect of your life.... Read More The process of clearing credit can be laborious and frustrating.... Read More Creditors will measure your credit rating based on the following... Read More Credit and charge card fraud costs cardholders and issuers hundreds... Read More Most of us get a credit card on our name... Read More If you intend to apply for a loan, you need... Read More If you want to purchase a new home or refinance... Read More It wasn't all that long ago that lenders blatantly discriminated... Read More Your credit history is important; in fact, in this day... Read More Whether you have no credit or damaged credit, secured credit... Read More In order to determine a consumer's credit worthiness, creditors and... Read More Anywhere you go online nowadays, you will see a multitude... Read More Are you one of the thousands pulling your hair out... Read More FREE credit checks or free credit reports. What are they... Read More Well now we add CitiGroup and UPS to the Identity... Read More The articles and tips provided on this site are intended... Read More Just when most people finish with school and can stop... Read More When you apply for a credit card, the application that... Read More
Adsense
websites
Dealing With A Collection Agency
Credit Problems? Heres How to Manage Your Creditors
Warning: Free Credit Report Imposter Websites Springing Up on the Web
What is the Check 21 Act?
Which Citi Mastercard Is Right For You?
Commercial Collections And Credit Granting
Can Credit Search Entries Affect Your Ability to get Approved for a New Loan in the UK?
How Your Credit History Can Affect Your Life
How to Get Credit Reporting Agencies to Help You
How Creditors Measure Your Credit Rating
Useful Tips On Avoiding Credit and Charge Card Fraud
Tips For Getting Your First Credit Card
Getting Your Credit Report and Understanding Whats On It
Good Credit is King, When Qualifying for Mortgage Programs
Understanding Your Rights Under The Equal Credit Opportunity Act
Taking Control of Your Credit History
Secured Credit Cards- Consumer Tips
Credit Reporting: How Does It Work?
Finding and Applying for the Right Credit Card Offer Online
How To Use Your Credit Cards Wisely
FREE Credit Report Offer - Careful, It Might Carry Hidden Charges
UPS Delivers the Goods, Your Identity
How To Choose Your Credit Card Application
Like It Or Not, You Have A Score To Settle! Part 1
Know Your Credit Card Rights
Affordable and Reliable Web Hosting Starting at $4.49/Month
Bankruptcy Myths Busted
The average American knows very little about bankruptcy. Most people... Read More
Dealing With A Collection Agency
Step I - Selecting A Collection AgencySelecting a credit collection... Read More
Understanding Credit Report Score
Understanding credit report scores is important when you see your... Read More
Beware of Bogus Credit Repair Companies!
So-called "credit repair" companies claim they can remove negative information... Read More
Grants, Loans, Free Credit Cards And Credit Repair: The Whole Truth And Nothing But The Truth
You got creditors calling you everyday. You could lose the... Read More
How To Protect Yourself Against Credit Card Fraud
In the high tech world of today, credit card fraud... Read More
Useful Tips On Avoiding Credit and Charge Card Fraud
Credit and charge card fraud costs cardholders and issuers hundreds... Read More
What is on Your Credit Report?
Your credit report is a very important piece of the... Read More
What is a Credit Card?
A credit card allows you to buy things even though... Read More
Student Credit Cards 101
Almost all students have and use student credit cards. Some... Read More
Automobile Credit Report
When applying for a loan to purchase a car, the... Read More
Fun with Credit Cards
For those of us who know how to use them... Read More
Why Your Credit Score is Important
Your credit score can either haunt you or reward you.... Read More
Always Avoid Payment Holidays
Once you've been paying off a credit card for a... Read More
Online, Phone, U.S. Mail or In-Person: Where is Your Credit Card and Personal Identify Safest?
Identity theft is the fastest growing crime according to the... Read More
Errors on Your Credit Report: What You Should Do
There are times when you may be turned down for... Read More
Credit Cards, Merchant Accounts, and Your Bottomline
Q: I'm opening a gift shop and want to be... Read More
Building Your Credit History
Today, credit is an indispensable part of our lives. In... Read More
4 Steps You Can Take If Your Online Credit Card Application Has Been Refused
Help! I've Been Turned DownYou received an envelope in the... Read More
Teaching Students To Keep Out Of Credit Card Debt - The Parents Role
Parents have the full responsibility for their children and their... Read More
Dealing With and Repairing Bad Credit
Bad credit can be a burden for otherwise good credit.... Read More
Choosing The Credit Card That Is Right For You
Credit cards represent an important part of our financial lives.... Read More
How Credit Scoring Works
The all important credit score! It determines the amount of... Read More
Home Loans ? Repair Your Credit Before You Buy
Before you take out a home loan or make any... Read More
Understanding the Function of Credit
What is Credit?Credit is the backbone and the engine behind... Read More
Credit |