Credit card interest calculator with grace period & different interest rate calculation methods?
I thought it was such a useful suggestion that I went ahead and created them. I'm sure you're not the only one who could derive some benefit from them, I know I will. http://www.investy.com/tools When I have some additional time, I will add the option for grace-periods, but for now I wanted to get them up so you could use the calculations as-is from the article. Enjoy. (Disclosure: I'm the founder of the site they are hosted on and I wrote the code for the calculators) If you want to ensure that you stop paying interest, the best thing to do is to not use the card for a full billing cycle.  Calculating credit card interest with precision ahead of time is difficult, as how you use the card both in terms of how much and when is critical.
"I think this stuff was more valid when grace periods were longer. For example, back in the 90's, I had an MBNA card with a 35 day grace period. Many business travellers used Diner's Club charge cards because they featured a 60 day grace period. There are valid uses for this: As JoeTaxpayer stated, if you are benefiting from ""tricks"" like this, you probably have other problems that you probably ought to deal with." If the base rate is USD LIBOR, you can compute this data directly on my website, which uses futures contracts and historical data to create interest rates scenarios for the calculations: http://www.mortgagecalculator3.com/ If your rate index is different, you can still create your own scenarios and check what would happen to your payments. "The answer to almost all questions of this type is to draw a diagram.  This will show you in graphical fashion the timing of all payments out and payments received.  Then, if all these payments are brought to the same date and set equal to each other (using the desired rate of return), the equation to be solved is generated. In this case, taking the start of the bond's life as the point of reference, the various amounts are: Pay out = X Received = a series of 15 annual payments of $70, the first coming in 1 year.  This can be brought to the reference date using the formula for the present value of an ordinary annuity. PLUS Received = A single payment of $1000, made 15 years in the future.  This can be brought to the reference date using the simple interest formula. Set the pay-out equal to the present value of the payments received and solve for X I am unaware of the difference, if any, between ""current rate"" and ""rate to maturity"" Finding the rate for such a series of payments would start out the same as above, but solving the resulting equation for the interest rate would be a daunting task..." "There are two things I can think of that might be different in other countries: Until 2013, American Express, Visa and MasterCard prevented businesses from charging extra for credit card usage, and credit card surcharges still illegal in several states. Since credit card companies add a surcharge to credit card purchases, and merchants can't pass that onto credit card users, they just make everyone pay extra instead. Since everyone gets charged the credit card surcharge, you might as well use a credit card and recoup some of that via ""rewards"" points. Almost all credit cards here have grace periods, where you won't be charged interest if you pay back your loans in full within some period of time (at least 21 days). This makes credit cards attractive to people who don't need a loan, but like the convenience that credit cards provide (not carrying cash, extra insurance, better fraud protection). Apparently grace periods aren't required by law here, so this might be common in other countries as well." The details of credit score calculation tend to change periodically, but the fundamentals are mostly consistent.  Pay your bills, keep your average account age high, overpay your credit card minimums, and keep your overall debt low.  And do soft pulls on your credit report to see what's happening. First, the simplest route: pay all your bills early or on time.  Automatic deduction may be useful in this regard, especially for bills with predictable amounts.  A corollary to this tip is to never leave an unpaid bill.  What often happens to young people is in the course of moving around they leave the final bill unpaid and it gets reported to collections.  Make sure you follow up online with all bills, even after canceling the service. Second, average account age and oldest account age matter.  Open an account like a credit card and never close it, so you'll have an older account (hopefully a zero-fee card).  Try to keep other accounts open rather than closing them (no need to cancel a zero-fee credit card) so your average account age stays higher.  A card that works on internal systems (like a gift card) is not going to show up on a credit report; a card that works like any VISA/MC is likely going to show up.  The rule of thumb is if they need your SSN to run a credit check for the application, then the card will appear on a credit report.  You can pull your credit report to find out if the card is listed (you may have to allow time for lag before the card appears, but I'm not sure how long that might be).   Third, a tip for extra credit score is to pay more than the minimum required on credit card bills.  You can achieve this by either using your credit card at least once a month or by leaving a small hanging balance each month so there's always something to overpay next month.  Credit card reporting will be either: unpaid, underpaid, minimum paid, or overpaid.  Minimum payment helps your score and overpayment helps more.  If you can use your credit card every month, that will give you something to overpay every month.  Otherwise, you can leave a small debt left on the card but still pay over the monthly minimum.  However, your total debt load, especially debt carried on your cards, counts against your score; aim for less than 10% of your limit. Finally, of course, is to pull your credit report periodically.  You need to know what others are seeing.  Since debt load utilization matters, make sure the reported card maximum is correct on your credit report.  Talk to your bank or account issuer if the limit is wrong.  If a collection appears, then you need to handle it.  Often you can negotiate with the collector, but be careful to negotiate how they will report the resolution.  You want them to agree to remove any negative information (either in exchange for payment or because of a mistake).  Failing that, you want them to mark it paid in full or satisfied in full; letting them notate your score that you only partially paid is what you want to avoid, since it most signals someone with cash flow problems and credit issues.  They control their reporting to credit bureaus, so if the person on the phone demurs, ask to speak to their supervisor or someone with negotiating authority.  Try to get any agreements in writing. Remember that your total debt load is a factor in your credit score.  Home loans and student loans do affect credit score.  If you take on a smaller home loan, then it will affect your credit less harshly (and leave you with smaller monthly payments). Billshrink offers some pretty neat analysis tools to help you pick a credit card. They focus more on rewards than the features you mention but it might be worth a look. If you use Mint, they offer a similar service, too. If you're not already using Mint, though, I'd look at Billshrink as Mint requires some extensive setup. MOD EDIT  Looks like billshrink.com is shut down.  From their site: Dear BillShrink customer, As you may have heard, BillShrink.com was shut down on July 31, 2013.   While we’re sad to say goodbye, we hope we’ve been able to help you be   better informed and save some money along the way! The good news is   that much of the innovative award-winning BillShrink technology will   still be available via our StatementRewards platform (made available   to customers by our partnering financial institutions). Moreover, we   expect to re-launch a new money-saving service in the future. To see   more of what we’re up to, visit Truaxis.com. We have deleted your personal information as of July 31. We will   retain your email address only to announce a preview of the new tool.   If you do not want us to retain your email address, you can opt out in   the form below. This opt out feature will be available until September   31, 2013. If you have already opted out previously, you do not need to   opt out again. If you have any further questions, contact us at   info@billshrink.com. Thanks, The BillShrink/Truaxis Team You can't buy it outright. You can't take the time to save up. if the remaining choice is between a card that charges from day one, and a card with this kind of grace period, the grace card is the better choice. Plan wisely, pay it in full before that rate starts to be charged. One additional note - There are two groups of people, the pay-in-fullers and the balance carriers. I believe that one should pay in full, and never pay interest.  A zero rate offer can be used by the balance carrier to feel great for 12 months, but have even more debt after the rate kicks in.  As a pay-in-full user, I've used the zero rate to throw $20K at the 5.25% mortgage, and planned a refinance to 3.5% just as it ended. a $750 savings (after the tax effect) well worth the bit of effort.  The fees should be in the fine print. My zero rate had a transfer fee, $50 max, which was nothing in comparison to the savings. Although this scheme is likely to get shut down rather quickly by either your broker or credit card company some points you seem to have missed out on. Properly timed you should be able to get ~55 days of grace period (30 day billing cycle + 25 day grace period) assuming you pay everything off every month and charge immediately following the statement date.  You will need to avoid certain card issuers that code all transactions with financial institutions as cash advances (Citibank in paticular). If it is possible it would be in your best interest to lower cash advance limits to 0 to avoid any chance of cash advance fees. If your credit card attempts to process it as a cash advance the transaction will just be declined and you won't be out anything. Otherwise one cash advance fee will eat several months worth of profits. As far as investments with guaranteed principal goes the only thing you can realistically do is money market accounts and maybe treasury notes. Anything else and the short term price fluctuation may leave you high and dry. If this scheme were to work you would be much better off attempting to get rewards for the purchases than anything you could invest in. If you used a 2% card and churned it every month you would be looking at a 24% return on credit card rewards. Even 1% rewards gives you a 12% annual return which is going to beat anything you could invest the money in. "The best way I know of to get the interest rate lowered is to call the credit card company and simply ask. Typically if a credit card company thinks you will leave them for another company they will be willing to work with you.  There is also the option of transfering some of the higher interest debt to one of the lower interest credit cards. It sounds like you have your friend on the right track by focusing all extra money on the credit card with the highest interest rate. Then after that one is paid off send all extra to the next highest one and so on.  The classic ""snowball"" effect." "Banks have to disclose up front the Annual Percentage Rate or interest rate that will be charged if you have an outstanding balance on a credit card. However, the APR of 19.9% is not charged all at once. For example if you had a $100 dollar balance on your credit card you would not be charged 19.9% interest or 19.90 making your new balance 119.90. Instead you would be charged the periodic rate which is one month's interest. You can easily calculate the period rate by dividing the APR by 12. So, 19.9% equals 1.65833% per month. This means if you had a $100 balance you would be charged 1.65833% interest or 1.66 making your new balance 101.66. Ask the bank or look on the website for a document called ""Cardholders Agreement"". If you can't find a link ask them for a copy so you can read all the fine print ahead of time." "There are two issues here: arithmetic and psychology. Scenario 1: You are presently paying an extra $500 per month on your student loan, above the minimum payments. Your credit card company offers a $4000 cash advance at 0% for 8 months. So you take the cash advance, pay it toward the student loan, and then instead of paying the extra $500 per month toward the student loan you use that $500 for 8 months to repay the cash advance. Net result: You pay 0% interest on the loan, and save roughly 8 months times $4000 times the interest on the student loan divided by two. (I say ""divided by two"" because it's not the difference between $4000 and zero, but between $4000 and the $500 you would have been paying off each month.) Clearly you are better off. If you are NOT presently paying an extra $500 on the student loan -- or even if you are but it is a struggle to come up with the money -- then the question becomes, can you reasonably expect to be able to pay off the credit card before the grace period runs out? Interest rates on credit cards are normally much higher than interest rates on student loans. If you get the cash advance and then can't repay it, after 8 months you are paying a very steep interest rate, and anything you saved on the student loan will quickly be lost. What I mean by ""psychological"" is that you have to have the discipline to really repay the credit card within the grace period. If you're not very confidant that you can do that, this plan could go bad very quickly. Personally, I've thought about doing things like this many times -- cash advances against credit cards, home equity loans, etc, all give low-interest money that could be used to pay off a higher-interest debt. But it's easy to get into trouble doing things like this. It's easy to say to yourself, Well, I don't need to put ALL the money toward that other debt, I could keep a thousand or so to buy that big screen TV I really need. Or to fail to pay back the low-interest loan on schedule because other things keep coming up that you spend your money on instead, whether frivolous luxuries or true emergencies. And there's always the possibility that something will happen to mess up your finances, from a big car repair bill to losing your job. You don't want to paint yourself into a corner. Finally, maxing out your credit cards hurts your credit rating. The formulas are secret, but I understand that if you use more than half your available credit, that's a minus. How much it hurts you depends on lots of factors." In my opinion, the simplest way to run these numbers is to first assume you are borrowing the full amount, including the points, if any.  They run a spreadsheet, and while using the new rate, apply your full current payment each month.  Then compare balances at month 48. You'll find it easy to calculate the breakeven. In the case of the negative points, it's immediate. For higher points, the B/E is later but then you are further ahead each month. They changed the way trailing interest is calculated back in 2008 if I recall correctly. The idea at the time was that the interest charges to the customer were somewhat less, but it made trying to get a payoff quote a PITA. They used to take payments for more than the current balance due at that time, however. I can't provide any insight as to why they won't now, though. I don't know of any that are comparable to credit cards. There's a reason for that. Debit cards, being newer, have a much lower interchange rate. Since collecting on debt is risky and less predictable, rewards / miles are paid from those interchange fees. This means with a debit card there's less money to pay you with. So what can you do? Assuming your credit isn't terrible, you can just open a credit card account and pay in full for purchases by the grace period. I don't know how all cards work, but my grace period allows me to pay in full by the billing date (roughly a month from purchase) and incur no finance charges. In effect, I get a small 30 day loan with no interest, and a cash back incentive (I dislike miles). You're also less liable for fraud via CC than debit. What are you using the analysis for? If your analyzing your interest rate risk then you want to determine decay rates for your non-maturity deposits. Assuming your bank uses ALM software to produce your Earnings-at-Risk (EAR) and Economic Value of Equity (EVE) metrics, the decay rate assumptions make a big difference in those numbers. Most ALM models have default assumptions that may not be correct for your institution, and as a result are giving you EAR and EVE numbers that are not at all accurate.   Basically you want to have some analysis that proves how you are bucketing your NMDs (3,6,9, 12, 24 months?). Are your deposits sticky or are they affected by small changes in interest rates? You can look at historical numbers to determine how your deposits behave, but be sure to go back more than 3-4 years as deposit behavior has been pretty abnormal since 2008 with rates near zero. Similarly, you may want to try and identify 'surge' deposits that came into your bank due to the low rate environment and as soon as rates rise they will move into higher earning assets (stocks, bond, money markets).