Quick Credit Card question about APR.

Freeman · 14 Jan 2012 at 12:32

Hi.

I've not used a credit card before (not gone into debt or needed a card) but am a bit confused on how to work out the APR.

I'm currently looking at a card that offers 12.9% APR variable (22%).

To my limited understanding if I were to borrow £1000 on the card and pay it off by the end of the month then I will be charged approximately just over £10 if I were approved the 12.9% rate.

Is this correct, or am I understanding APR incorrectly?

Cheers.

Mr^B · 14 Jan 2012 at 12:38

You won't get charged at all. Most cards only start charging interest after a certain amount of days. Most of them for about a month, some for longer.

Freeman · 14 Jan 2012 at 12:47

Mr^B said:
You won't get charged at all. Most cards only start charging interest after a certain amount of days. Most of them for about a month, some for longer.

This card charges on all withdrawals.

It's a card for travelling so it's how they charge you.

Slade2 · 14 Jan 2012 at 12:56

well, that is not how normal cards work. You will pay a small fee to get cash from any credit card normally a cash advance fee. And then you can also pay more APR for cash then for purchases. If a card is 12.9APR then if you borrow £1000 over the next twelve months that debt will increase to £1129.00 if you dont make any payments but the system is designed to keep you having that debt and paying the minimum which most of the time just covers the level of interest so you keep the level of debt. Ideally you want to pay it off asap to incure the least amount of interest.

MrBlobby · 14 Jan 2012 at 13:07

Freeman said:
Hi.

I've not used a credit card before (not gone into debt or needed a card) but am a bit confused on how to work out the APR.

I'm currently looking at a card that offers 12.9% APR variable (22%).

To my limited understanding if I were to borrow £1000 on the card and pay it off by the end of the month then I will be charged approximately just over £10 if I were approved the 12.9% rate.

Is this correct, or am I understanding APR incorrectly?

Cheers.

Depends what you mean by borrow, if you mean but some stuff, then you get until the bill comes plus a few weeks interest free. If you're doing a cash withdrawal you'll probably have to pay a cash advance fee of about 3% then interest on the top immediately which maybe more than the 12.9%, best of asking the bank really.

fobose · 14 Jan 2012 at 13:13

Why dont you save up the money first, so you dont need to pay any interest?

OllyM · 14 Jan 2012 at 13:14

Freeman said:
Hi.

I've not used a credit card before (not gone into debt or needed a card) but am a bit confused on how to work out the APR.

I'm currently looking at a card that offers 12.9% APR variable (22%).

To my limited understanding if I were to borrow £1000 on the card and pay it off by the end of the month then I will be charged approximately just over £10 if I were approved the 12.9% rate.

Is this correct, or am I understanding APR incorrectly?

Cheers.

Your calculations are correct. However, if you have a limited credit history I would be surprised if you get the lowest APR - only 51% of applicants get it, the other 49% get either 17.9% or 21.9% APR.

When abroad you are better off paying for things on the card wherever possible, and only withdrawing cash when you absolutely have to.

OllyM · 14 Jan 2012 at 13:16

fobose said:
Why dont you save up the money first, so you dont need to pay any interest?

Because it's the cheapest way of spending abroad? I expect he does have the cash, he just wants to avoid being ripped off by using a regular debit/credit card abroad.

Wyrdo · 14 Jan 2012 at 13:20

you're going to be using this card for cash withdrawals? Do not do that unless you absolutely need to, the interest is a killer.

If it's just for purchases then you don't start paying interest for the first 30 days, cash you start paying interest on immediately.

fobose · 14 Jan 2012 at 13:24

Unless I have read this wrong, this post office card gives 0% commission on purchases abroad, and no interest for the first 3 months:

http://www.postoffice.co.uk/finance/credit-cards-loans/credit-card&campaignid=MSM_CC&AFFCLIE=PO02

although I guess if you want to withdraw cash thats when they get you.

Freeman · 14 Jan 2012 at 13:40

OllyM said:
Because it's the cheapest way of spending abroad? I expect he does have the cash, he just wants to avoid being ripped off by using a regular debit/credit card abroad.

Correct. I have all the money but am wanting to use a credit card due to it's 'decent' ratings abroad.

Wyrdo said:
you're going to be using this card for cash withdrawals? Do not do that unless you absolutely need to, the interest is a killer.

If it's just for purchases then you don't start paying interest for the first 30 days, cash you start paying interest on immediately.

According to the card I may be applying for it does not charge any more for cash withdrawals. 12.9% covers everything.

It's the Halifax Clarity card if anyone has experience with it.

Seft · 14 Jan 2012 at 16:52

Halifax Clarity is a sensible choice for spending abroad. Even though you'll pay interest straight away on a cash withdrawal, the total cost will compare well against what you'd pay at a forex desk.

N.B. You can transfer money to pay off the debt at any point, not just when you get your statement, so the sooner you pay off the cash withdrawal, the less you pay.