Items you will need
- Credit card statement
Some people are so swamped in credit card debt that they are afraid to even look at their bills, let alone analyze their credit card percentages. But the only way out of debt is to gain an understanding of what you are being charged and when so that you can take the appropriate actions to pay down the debt aggressively. Here are some guiding points for determining your key credit card percentages and rates.
Look at your credit card statement online or in your bill. There should be a section that discusses your interest rates. You may have more than one interest rate listed depending on the categorization of your balances. One interest rate may be for purchases, another for balance transfers, and yet another for ATM withdrawals you made from your credit card. Work with one interest rate at a time when calculating your credit card percentages.
Calculate your average monthly interest rate by dividing the credit card interest rate percentage by 12.
Calculate your daily interest rate by dividing your yearly (annual) interest rate by 365. For example, if your credit card interest rate is 12.99 percent per year, your daily rate is .0356 percent.
Calculate your APR (annual percentage rate) for each billing period by adding in all of the finance charges you paid that month, including interest on all balances, balance transfer fees and other transaction fees. Divide that dollar amount by the number of days in your billing cycle. Then multiply the resulting figure by 365 (days in the year). Divide that resulting figure by your principal balance for that billing cycle (total up all the balances listed in your "Finance Charge Schedule" to determine that amount). Convert the ending decimal figure into a percentage rate by multiplying it by 100. This is the annual percentage rate you are paying in that particular billing cycle.
Use your daily interest rate to calculate how much money you are spending each month on interest by multiplying the daily interest rate by your current credit card principal balance, and then multiplying that dollar amount by the number of days in the billing month. Stay on top of your credit card company to make sure that your credit card percentages are the same as they were the previous month. If the credit card company raises your rates, you have the right to reject the rate change. The only down side is that you will probably not be able to continue to use the credit card for new charges.