Using 17% (just +0.5% to your APR) to this calculation over 11 months only adds about $17 to the total which isn't even enough to file a small claims case if your friend stops paying you - never mind collection costs, time, and the fact that interest will continue accruing on the debt that was of no benefit to you. If you charge your friend 17% or 20% you're still severely under representing your risk in the situation. "I cosigned a car but the person moved across the country and stopped paying the loan," etc.įact of the matter is, as far as the bank is concerned, that debt is yours. I understand the you probably think it would be "unfair" to charge a rate higher than what you were charged, but you should spend a minute searching on here for the horror stories that come after favors like this fall apart. You assumed a lot of risk in this transaction risk that you should be compensated for.
I'm not sure why your interest rate on the credit card matters. Why? It seems like you're doing your friend a favor, letting him store some debt in your name and you're actually quite lucky to have been paid back the $3,700.
#Money manager ex calculate interest on credit card payments how to
I want to be sure not to charge him for any interest accrued for theĭebt I already had on the card, and I am not sure how to separate the
Others have addressed the math so I'll just focus on the philosophy. If you charge him both, you are really charging him twice, in my opinion. By charging your friend the increasing amounts shown in column B, you are already essentially collecting the "lost savings" in column D. However, you have been paying it each month, which means that the interest you have been paying on it has essentially been a flat $50.51 each month. You'll notice that your friend's interest charge goes up each month, because he hasn't been paying on it. However, we need to look at the other side of this in Column B. I put together a spreadsheet that shows the "lost savings" each month:īased on this premise, having to pay your friend's interest each month means you lost out on $49.84 that you could have saved if you had instead been paying down your principal. Each of the following months you would have less savings, because there are fewer months left for you to save interest over. If that $50.51 had gone toward your principal instead, you would have saved $8.12 in interest over the next 11 months. For example, in the first month, $50.51 of your payment was for his interest. You are saying that because you had to pay his portion of the interest over these months, you missed out on the extra debt reduction and had to pay additional interest on your portion. However, I think I see where you are coming from. It's not really your friend's fault that you didn't pay more. However, you could have paid more toward the principal, and chose not to. By charging your friend the $595 calculated above, you are crediting all of these principal payments for your own debt (as you should, since your friend wasn't really making any payments). However, your friend did give you $500 in early payments, which helped you make your credit card payment.Įach of these monthly payments that you made includes a small amount that goes toward reducing your debt (principal). Yes, if you didn't have this purchase on your card and were still paying the $200 each month, you would have reduced your debt more. Your $200 monthly payment covered all of your interest and your friend's interest and helped pay down your debt. Having that charge on my card cost me money, that is for certain. Had that amount not been on my card, I would have been paying the same amount and making headway on the debt. This assumes that he didn't pay anything to you until the one payment after 11 months.īy having that amount on the card, the minimum payment was about $200 a month, and I made little headway in ever reducing the debt. If the number of days is 330 (about 11 months), the interest would be $595.11.
Where P is the principal ($3700), r is the daily interest rate (16.5%/365 = 0.0004521), and n is the number of days you are charging interest. The number of days would be from the date of purchase to the date of payment. Since you were already carrying a balance on your card before this purchase, there was no grace period. There is usually a grace period for new purchases, where you aren't charged any interest until your first bill however, the grace period only applies if you pay your statement in full. So if you want to compute this accurately, you need to figure out how many days you are being charged interest. Credit card interest is generally compounded daily.
0 kommentar(er)
