How do you calculate what you'll pay in interest?

Calculating interest

There's a great Javascript calculator from Money magazine and CNN that will give you your answer: http://cgi.money.cnn.com/tools/debtplanner/debtplanner.jsp

I plugged in your numbers and here's what I got:

It will take you 7 years and 9 months to pay off your credit card. You will pay a total of $839.59 in interest.

I bet you didn't want to see that. :-)

If you're interested in the math behind it, here's what it's doing. Next month you will owe $1016.38 plus $1016.38 (last month's balance) times .179 (your APR) times 1/12 (one month) minus $20 (what you paid last month). The month after next you will owe your balance from next month times your balance from next month times .179 times 1/12 minus $20. And so on and so on.

Here's a more in-depth mathematical explanation of this from "Dr. Math": http://mathforum.org/library/drmath/view/54618.html.

 

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