79.9% APR – Will You Cut Up Your Credit Cards Now?

Okay folks, I’ve talked before about cutting up your credit cards. If you were unsure about doing that before maybe you should read this article. If that doesn’t make you cut them up than I don’t know what will. I mean really…79.9%. What’s up with that?

I don’t know how to figure APR on a credit card balance but something tells me if you had a $500 balance you will have to pay somewhere around $400 in interest payments per month year**. Yikes!! If someone knows how to figure that out, please comment the correct amount. I would love to know exactly how much interest you would be paying.

**Update: Check out Kristie’s comment on this post. She breaks it all down and the numbers are crazy. Thanks Kristie and good luck with your debt snowball.

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  • Kristie

    Hi Cindy!

    I'm so glad you posted this because I can't imagine that people realize how much they're paying in interest and fees and yet still carry balances on credit cards anyway!

    APR is the annual percentage rate you would pay on your balance – the amount of interest you would pay over the course of a year. Credit card companies and other lenders are required to make this number available so that the consumer can easily compare them.

    In order to determine what you would pay in interest monthly, you would divide this number by 12 and apply that percentage to your monthly balance.

    For instance – 79.9% APR divided by 12 = 6.66% monthly. If this person were to carry an average balance of $500 on their card from month to month they would pay approximately $33.33 in interest each month – or $400 over the course of a year. That's a high price for the 'privilege' of borrowing money!

    $33 a month may not sound like a huge amount to some people, but keep in mind that the average american household carries $8,000 in credit card debt. At 79.9% APR, that would cost them $532.80 a month – or $6,392 a year!

    Sorry for the lengthy explanation – I'm such a finance geek 🙂

    This is a great explanation if you want to know more about this: http://www.careonecredit.com/Knowledge/cost-of-credit.aspx

    -Kristie

    Ps. I just recently put an end to my era of stupidity and started my debt snowball – planning to be debt free by age 25!

  • Cindy Livesey

    Kristie,
    Don't apologize for the long post…I LOVE IT!! Thank you. That is exactly what I was looking for. I am going to update the post and direct them to your comment.
    Cindy

  • Snoogums

    Thanks for posting, that was a simple explanation and one I'll look at!