this is very informative! although the computation part makes me dizzy and i’m a math major. hahahhahaha!

i’m happy to say, that i have never learned the computation but i have religiously paid off every cent of my credit card bill every payment due date. just made sense to me. i remember a friend once told me, no bank will ever give you a 3.5% interest rate every month.

i know another friend who told me he would pay off all his CC bills and it was still 2003. until about last month, he had not done it. i told him to get those savings and pay it all off. i don’t know if he has done it yet, but i hope he has.

thanks salve for money smarts.

Hi Salve. I didn’t get the last part. How did credit card worked for you? Thanks.

what if you use the maximum credit limit just once and no more succeeding purchases, how long will the debt be fully paid if you pay the minimum monthly amount only?

If you are 20 years old at the time you swiped the P100,000 credit card debt, you will still have debt when you retire by age 65. The interest that you would pay by age 65 is more than double your original credit card debt at P233,266.72 and even after paying all that interest, your principal payment has only reached P99,971.45.
See earlier post:
http://www.inquirerbloggers.net/moneysmarts/2007/04/30/credit-cards-the-true-cost-of-paying-only-the-minimum/

with the average lifespan of 70 years old for credit card holders and those who passed away at early age,who pays the remaining balance?

don2x–
Theoretically speaking, that day will really never come if we strictly use the mathematical formula used in Salve’s illustration above.

But the reality is that there is a minimum amt w/c for one CC is P200. So if ur 5% gets lower than 200, then you pay 200. Using Salve’s illustration, you will start paying P200 on the 214th month. So after 20 yrs. & 8 mos, you would have paid up ur P100,000 starting balance.

The good news is that if you continuously pay 5% of 100,000 or P5,000 a month, u wud have paid up in only 35 mos. & the better news is when you pay 10,000 a mo., then you wud have paid up in less than 13 mos.

Salve–
To help out some of ur readers who want to find out how long it wud take them to have their CC debt (or any loan) paid out given a certain budget, perhaps I can do the math for them. They can ask from u my CP # & they can text me the details (unless u will permit me to give my # here). I dont get to visit the blog kasi on a daily basis.
Thanks & more power to u & Money Smarts!

1st question, How did you compute for the no. of days in cycle?

2nd question, If I have php100,000 right now, what best advise would you give me to make it grow? shall i go into business or invest in finance instruments?

thanks

[...] finance charge computations on your credit card in Money [...]

Hi Salve,

It’s my first time to comment here but I’ve been reading this blog and sending the link to my friends.

How I make the credit card work for me? First, I pay my credit card billing every month to avoid interest. I’m glad I’ve been doing that for years now. Second, I track all my credit charges and ensure that I don’t go beyond what I can afford to pay in my due date. When I feel the need to use it and have already reached my ‘allowable charges’ for the month, I delay the purchase at least a day after my statement cut off so that it will be captured in my next next billing statement. Let’s say my cut off is on June 28 (every 28th day of the month) and due date for this will be on July 19. If I need to use my card and I don’t want it to be included in my July 19 billing, I’ll use it on June 29 onwards so that it will be captured in my Aug 19 billing. This means the card issuer has given me 1.5 months to settle it, long enough for me to save for the payment. Lastly, when someone wants to use my card for their installment purchases, I pay it in full without them knowing it then charge them the same interest my credit card company charges them for installment. I just require them to deposit the monthly installment to my account instead of let them pay the card company directly because I’ve already paid it in full.

thanks for this topic, salve. i have always paid my CC bill in full every month, and this has worked well.

recently, however, my husband purchased an appliance on 0% interest - unfortunately, BEFORE your blog on 0% interest came out. when bill arrived, we paid full payment just the same. my friends said i should just have paid one-sixth (6 months no interest) of thatpurchase.

we couldn’t understand the bill, so to avoid any problem, we just paid in full. did we do the right thing or were my friends right in saying we should’ve just paid the one-sixth amount?

pls clarify

[...] Money Smarts: Demystifying finance charge computations on your credit card [...]

Hi Femaad,

I’ve availed of 0% interest installment in the past. From my experience, your card bill should give you the full amount, the number of remaining installments and the amount of monthly installment.

The total balance due should account for the monthly installment only (plus your purchases) while the rest of the future installment is sometimes called unbilled amount (normally deducted from the available balance).

If the total price of the appliance is reflected in the total amount due, the cashier probably made a mistake when he/she processed your 0% installment purchased.

In cases like this, the best thing to do is call your card company and calrify your bill.

regards,
nina

Credit cards are there to suck the money out of customers!
This explanation is as demystified as it gets. Clear?

nina, thanks a lot for explanation.

for next purchases, though, if any, we will just revert back to straight charge and pay full when bill arrives.

or maybe, will just use debit card…

share ko lang: i can not recall the exact figures, iexagerate ko na lang figures…….

i made a mistake of keying my payment thru the phone…. instead of paying the exact amount of let say 10,500 pesos, i entered 10,000 pesos…..

wow and behold, on my next billing period they are charging me 1,000 pesos for balance of 500 pesos, aba… aba….

kina usap ko phone banker nila, nag fax pa sila ng computation…..

pinagpilitan ko reason ko na 200 percent ang finance charge nila for my balance of 500….

mabait naman ang credit company ko, pumayag na ireverse na lang nila yung finance charge…….

eh kung hindi ako nag reklamo, tuloy ang finance charge…..

PAY THE FULL AMOUNT EVERY BILLING PERIOD……

DONT USE YOUR CREDIT CARD IF YOU CANT AFFORD TO PAY YOUR PURCHASES AT THE END OF BILLING PERIOD…..

TAMA NA ISANG CREDIT CARD, ISANG ANNUAL FEE LANG BABAYARAN…..

thank you salve for posting this! i printed it out and have yet to learn it. i’m determined to do so.

don2x, if I remember correctly, banks can go after the money you leave in your estate. In short, the spouse and the kids will have to pay the remaining balance.

hi angie, thanks for offering to help our readers. Unfortunately, it is editorial policy not to post personal email addresses or phone numbers — also for your protection. Just me email me off-list if you want more specific help from angie

zaldy, from what I gathered in this official computation from one of the biggest credit card companies in the country, April 20-April 23 is three days. If you look at the “No. of Days” column, it counts the number of days your balance was at a certain level, and adds them all up at the bottom. Hope this helps.

hi vanz, kudos to you for your discipline. Its really not that difficult to do, once you begin to be aware of how much you are really paying to the credit card companies in terms of interest.

femaad, since you have already purchased the item, pay the installment amount na lang, not the full amount of your purchase price. this way, you can still benefit from the slightly reduced monthly interest. Hope this helps.

clipmaster, thanks for sharing that. grabe..

azi, yey! as i said, its not really that hard once you become averse to paying finance charges.

nina, thanks for the tip!

salve, just wondering…can credit card companies go after surviving members of family if the estate of the deceased cardholder has been transferred already to the heirs? i can just imagine the family will say cemetery as the forwarding address of the deceased cardholder.

[...] September 2nd, 2007 · No Comments Money Smarts » Demystifying finance charge computations on your credit card [...]

any idea where can i get reliable agent eastwestcard and metrobankcard? thanks lot.