Understanding a statement

  K_elt 13:43 30 May 2008

I got a statement from my CC. It shows any balance and the interest to be paid. Using the information given on the statement I tried to calculate the interest myself, and came up with a different figure than that shown!

Foolishly, I tried contacting customer services, only to be told I wasn't calculating it correctly, I wasn't taking into account all the facts, and different calculators give different results!

Perhaps someone here can explain where I went wrong. I took the balance shown on the statement, found what the percent interest would be using the stated monthly interest rate and it gave a figure different from the stated amount. Simple I thought, but obviously not.

  QuizMan 14:11 30 May 2008

I assume that CC = credit card. It is likely that interest is calculated on a day to day basis. It should (in theory) be easy to work out unless there has been a lot of movement with additional debits and credits. My guess is that the figure is based on the balance as at the last statement and goes up to the date of the latest one. If there has been no movement, the calculation is the balance * annual percentage rate / 365 * by the number of days between the 2 statement dates. It gets more complicated with debits and credits going through. If so, you will need to calculate each day individually and add the lot together. Excel is your friend for this.

Does this make sense?

  K_elt 14:31 30 May 2008

I assumed it was any balance shown calculated using the monthly interest rate shown (no daily rate or amount of days displayed on the statement) to produce the figure under interest charged. Yes credit card.

  crosstrainer 14:33 30 May 2008

CC interest is calculated using different parameters for certain transactions. For example, a cash withdrawal (often referred to as a "cash advance") carries a higher interest than a purchase from a shop or online transaction.

This may be where your figures are going awry.

  ened 15:58 30 May 2008

Is it perhaps calculated cumulatively?

ie: 10% of £100 on day one + £110

Thus day two would be 10% of £110 etc.

  K_elt 21:51 30 May 2008

I don't use a CC for cash advances, but thought the figures on the statement should be able to be used to verify each other, i.e. balance calculated by interest rate = interest to be paid.

  belfman 21:58 30 May 2008

Calculated on each item from the date it went on to your card. The interest isn't an issue they're ever likely to get wrong... it's extra charges, late payment & over-limit fees etc and items you don't remember buying I'd be more concerned about appearing out of the blue.

I once read a relatives card bill (I don't have a CC) and it stated it would take about 10 years to clear if only the minimum was paid.

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