How do we calculate intrest amount for credit cards?
vemula b asked:
How do the credit card people calculate the interest amount (finance charge periodic rate) on the money we spend. Do all the credit card companies follow the same procedure?
get credit
How do the credit card people calculate the interest amount (finance charge periodic rate) on the money we spend. Do all the credit card companies follow the same procedure?
get credit
Tags: Credit Cards, Money, Periodic Rate
September 11th, 2009 at 10:22 pm
get credit
No, they do not all follow the same procedure, but soon they will have to.
As far as how they calculate it, they have certain brackets that people will fall into depending on their credit score. The credit score determines the person’s risk factor. The higher the score the lower the risk factor, the lower the interest rate. The lower the score, the higher the interest rate. Finance charges on cash withdrawals are the same for any cardholder regardless of credit score or interest rate.
Even for people with excellent credit, interest rates on credit cards are usually much higher than interest rates for mortgages, vehicle loans, etc. Also, even if you have perfect credit if your payment is a day late your interest rate can spike to the level of someone with horrible credit.
Credit card interest rates are in the process of being regulated by the federal goverment now and are the target of several new bills that are expected to be written into law within the next year or so. As of right now, all card companies have their own brackets and their own interest rates. They aren’t required to use the same procedure as any other company.
Hope this helps.