APR Rate for contractual interest claims - Very Important!

[rougesept]

Hi everyone,

After reading hundreds of posts on the Cap One forum, it seems that APR is still confused. The monthly rate from your statement (e.g. 2.05%)multiplied by 12 does not produce the correct figure of your current APR%. It produces a figure 3-4% less than your actual APR.

This example from CrispDust in the contractual interest thread is the best I've seen:

Start with £100 and an example monthly rate of 2.05% for example:

Month Debt Interest per month
1 £100.00 2.05% £102.05
2 £102.05 2.05% £104.14
3 £104.14 2.05% £106.28
4 £106.28 2.05% £108.46
5 £108.46 2.05% £110.68
6 £110.68 2.05% £112.95
7 £112.95 2.05% £115.26
8 £115.26 2.05% £117.63
9 £117.63 2.05% £120.04
10 £120.04 2.05% £122.50
11 £122.50 2.05% £125.01
12 £125.01 2.05% £127.57

so £27.57 interest on £100 over 1 year = 27.57% APR

Multiplying your 2.05% by 12 does not give you this correct figure, it sells you short (24.6%).

Advice is still being given on this forum to multiply monthly by 12 to give APR%. You can be more accurate (much more reliable if court comes a calling) and get a higher rate! I double checked my correct APR with Cap One (they call it EIR - effective interest rate) and this is correct.

Also, the 34.9% APR figure on the website is 'typical' most will not be at that rate. If you claim that rate, you may well get your money, I don't know? But you may be wildly inaccurate - this wouldn't look good if a judge ever sees it?!

Hope this helps, although it will prob cause brain meltdown for some! It did for me for a while!

Cheers

Rouge

[sarahpp]

Point taken Rouge but, speaking personally, I am quite comfortable with 34.9% as I know that this is the rate I would be paying if I still had an account with Capital One. I have seen several posts in the past saying that Capital One had put the poster's interest rates up to this level because of their perceived credit risk.

[rougesept]

Hi Sarah,

I don't think you're wrong, go for it. I just see some people have plucked the figure from the website when it may not apply to them in the slightest?

The reason being, I thought it applied to me for ages but was pleasantly surprised to see I was way off - (closer to 26%).

Because it's not stated anywhere, people have no real idea of their APR with Cap One (although you only have to call to ask) and latching on to the highest figure on the website may not be the wisest?

I wouldn't tell anyone what's right and wrong, just warning that there's some inaccurate ideas still being used - and to people's detriment!

Rouge

[dori2o]

Hi,

There was a post on one of the threads which showed you how to calculate the APR from the monthly intrest rate using excel (or any other spreadsheet)

simply put this equation into a cell.

=((1+rate of interest)^12-1)*100

i.e. =((1+2.207%)^12-1)*100

answer 29.94743 rounded down 29.9%

as you can see, it worked for me.

[rougesept]

Cheers dori2o, even better, that does work. It should be common knowledge, hopefully this thread can help it along!

Rouge