Credit Card Interest Calculation: loan w/ 0% interest, but handling fee

YES; your printout matches mine exactly...

Looks like taraK needs to get used to Excel...or another looper program...
 
Let's have some fun DrP!
amount = 5000
fee = 500
pay't % = 10
term = 6 months

I get .0207021 monthly = 1.020721^12 - 1 = .27875722 = ~27.88% effective
 
I get that too, but that's APR cpd monthly : .0207021 * 12 = .248425 = 24.84%
Compounding effect brings it to 27.88% effective:
1.020721^12 - 1 = .27875722 = ~27.88%
 
Dr.Peterson said:
If you can confirm or correct the numbers in the first three columns of my spreadsheet, I can tell you how I did the rest, which I think is the best answer we have found for your question. But I made the goal the total interest, in the fifth column, being 210, by manipulating the interest rate at top right. The idea is to suppose that interest is being charged on the outstanding balance each month from the lender's perspective, while the payments are based on the outstanding balance from the borrower's perspective.
Click to expand...

Hi, I'm not sure what you meant by 'the first three numbers', but the initial bits are correct (loan, fee, term); then the balance is also right $7210 and the first payment $360.50, but after that I'm not sure I have understood the numbers (so only two out of the next three). So I don't know what is meant by the 'effective balance' -- or 'interest' -- columns, as such. I'd be interested to know how the interest column is calculated.

fyi: The way the credit card people do it here is the add the $210 handling fee onto your credit card bill, while only sending you $7000. Then at the next credit card bill payment date they take the minimum payment back from your bank (or you can of course send it to them).

I'm afraid I use an Apple and have Numbers and that does have goal seeking, so I would have to do that type of calculation longhand.
 
taraK said:
Hi, I'm not sure what you meant by 'the first three numbers', but the initial bits are correct (loan, fee, term); then the balance is also right $7210 and the first payment $360.50, but after that I'm not sure I have understood the numbers (so only two out of the next three). So I don't know what is meant by the 'effective balance' -- or 'interest' -- columns, as such. I'd be interested to know how the interest column is calculated.

fyi: The way the credit card people do it here is the add the $210 handling fee onto your credit card bill, while only sending you $7000. Then at the next credit card bill payment date they take the minimum payment back from your bank (or you can of course send it to them).

I'm afraid I use an Apple and have Numbers and that does have goal seeking, so I would have to do that type of calculation longhand.
Click to expand...

First, I didn't say "the first three numbers"; it is important to read and quote math precisely! I said "the first three columns", which means all the numbers in those columns. But I will trust that if any row was wrong, you would have said so.

My "effective balance" is not really the right term for it; what I did there was to calculate how much the lender would consider still outstanding, if they counted the interest to be earned on the outstanding balance of the entire $7000 each month. So the interest column is calculated as the rate/12 times the balance from the previous month (in month 1, 0.025209/12 * 7000 = 14.71), and the balance by subtracting the payment and adding the interest (7000 - 360.50 + 14.71 = 6654.21).

The way to "seek the goal" manually would be to guess a rate, compare the total interest at the bottom to the goal of 210, and either increase or decrease the rate as needed to try to make it closer without overshooting. There are ways to make this process more efficient, and your spreadsheet may have some method by a different name than Goal Seek, but this simple trial and error will do it.

If what you are saying they do results in different results than I show in those first three columns, please tell us what they are, so we can determine exactly what the rules are. It doesn't sound standard, so we need to see the details to be sure we're interpreting what you say correctly. I can't imagine a credit card company not telling you what their rate is! In America, I think that would be illegal.
 
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