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The guide covers factors that influence credit card rates, such as the reference rate and margin. Finally, we also consider other costs to consider.

How is credit card interest calculated?

How is credit card interest calculated?

A credit card is quite familiar to most people, and many have one in their wallet and many have a card or two in their wallet. Multiple credit card tactics are a great way to avoid problems in a tight place.

Even if a credit card is in regular use and its operating principle is known, the method of calculating the card’s interest rate, as well as its benefits and costs, may be obscured by many. What do the reference rate and margin mean? Or how are they calculated on the remaining amount on the credit?

What is the reference rate on a credit card?


First, it is important to know and understand what reference rate is used for your credit card. Is the credit card reference rate a prime rate and what are their differences?

Almost without exception, credit cards use the reference rate of 3 months Euribor, which is supplemented by the bank’s own margin, for example 3 months Euribor + 7%.

How is credit card interest calculated?

How is credit card interest calculated?

Imagine the following scenario: a new computer costing $ 1,000 is being purchased. You want to leave your computer purchase on your credit card and pay off your invoice in full within two months with a tax refund.

The first month is interest-free, but after the first month you will have to pay the minimum credit card bill, for example 5% or € 50. After that, the debt remains € 950.

How much will I have to pay for a purchase if my credit card is tied to 3 months Euribor (current 3 months Euribor is -0.3%) and the margin is 8.5%? In addition to the interest you will have to pay an account maintenance fee of € 2.5.

To simplify credit card interest rate calculation:
First, it is advisable to calculate the current interest rate on the loan. Currently, we are enjoying the negative Euribor rate, which in this case is expected to reduce the credit card rate (NOTE: not all credit cards are affected by a negative reference rate, so check with your bank!)

Note that this is a very simplified principle of how to calculate an interest rate and may not reflect the full reality. The method of calculating the interest rate may vary from bank to bank – for example, some banks use Euribor 360 and others use Euribor 365 to calculate the reference rate.

As an example, another month will incur an interest charge of $ 8.99 together with the account management fee. Credit card margins are always always annual rates, which is why the interest rate is spread over 12 months to get the monthly rate.

Also, keep in mind that a potential annual fee for your credit card will add to the cost of using your credit card. Some banks and finance companies charge a portion of the annual fee, while others charge it once a year.

Credit card rates, annual fees, and benefits can vary widely. Make sure your credit card meets your needs. You should not pay for a card that does not offer the best interests.