Your APR Is Now 91.29% - Yours Truly, Bank Of America
David's effective APR on his Bank of America credit card is now 91.29%. It's not a typo or a scam, it's math.
"This was my first credit card and I've had it since 1997," writes David. "I only keep it for the history and I only use it every now and then as a backup. Am I reading this right that they bumped me up to a 91.29% APR?"
Yep, David. Your APR on this card is 24.98%, but since you have a balance near zero on it, that $1.50 finance charge makes the effective APR look huge.
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Crap. And I thought Capital One was bad for jacking me up to 22.9 percent. Is this some sort of error or just....damn.
I'm not sure. I know some CCs if you have a balance of less $1 than a certain amount they will hit you with a $0.50 finance charge. So let's say the balance was $0.50 ,a $0.50 finance charge would be an effective APR of 100%. Wouldn't some law prevent such a high APR?
The 91.29% finance charge includes transaction fee finance charges which make it seem wildly inflated. His actual APR is still 24.89%. My guess is he transferred a balance or withdrew cash, something that has a fee associated with it that makes that APR look so large.
Typo maybe?
I do love the advertising in the middle of the bill.
Guess this is BoA's plan to pay back some of that bailout monies.
Well I can't see what his balance is but since there's a min finance charge of $1.50 on it with a min payment of $15.00 I assume it's around $20.00 since twelve months of a minimum finance charge of $1.50 is $18.00 a year so the effective rate is ballooned thanks to the minimum finance charge.
/run-on sentence....
Gotta be a typo, right? Is 91.29% even legal?
When they tell you the effective finance charge for this billing period, they have to count the amount of all of their various fees as if they were interest. When you have a very low amount due, the fees can add up to a lot more than the actual interest, making the effective interest rate a lot higher than the percentage rate they're charging you on your balance.
You'll note that just a few centimeters way from the 91.29% is the real interest rate: 24.98%, which is still kind of ludicrous but not that unusual. Sometimes the truth doesn't make for very exciting headlines.
The fine-print makes clear that 91.29 isn't his current APR, it's the effective APR for that billing period. His balance is probably next to nothing, or there are other fees, as explained in the APR, that make it seem higher than normal. Really, it CLEARLY states on the bill why the APR is so high, so where is the confusion?
Yeah, that APR calc seems to be reflecting the $1.50 minimum finance charge with no actual balance being carried. Just an old, antiquated card with a min finance charge even if you carry no balance.
Surely a real 91.29% APR isn't legal. I mean, that's beyond loan shark levels.
To be fair, he IS getting a discount at hertz. That's got to be worth 30 ro 40 %...
I had this same issue with my January BOA credit card bill. It also had the $1.50 minimum finance charge, which caused the "Balance Subject to Finance Charge" to be 566.53%. I got a laugh out of it and put it in the pile of bills.
Well, if a 91% interest rate doesn't motivate you to get off credit card debt, then nothing will. Lots of credit card fees and super high interest rates are need to break the terrible credit card debt fever in the world.
I believe 91% APR is loan sharking, but after reading the response from lalaland13, I see that included a fee.
You guys are all wrong on this one...
Their is a minimum APR and a minimum payment on the account. If you all read the terms and condtions, you'll know this.
What has more than likely happened is this - his balance is above the 15 dollars - which means, his balance is more than likely above 15 dollars - because if was less, it would be that amount.
It clearly states the finance charge is the minimum finance charge - which means, that it is the his finance charge is supposed to be lower, but because of the terms and conditions, it is what it is. His balance is around 20 dollars...
Plain and simple...
Nice try guys...
@hypnotik_jello: Actually the effective APR would be like 1200% on that, since it would be a single month and the APR is an annual rate.
Now I have to get advertisements with my bill...wtf is that all about?
There really shouldn't be a question of this being "the new APR", it's labelled as "APR for this billing period" and even says "includes Minimum Finance Charges and Transaction Fee Finance Charges that results in an APR which exceeds the Corresponding APR above)".
I worked in a credit card customer service center, and we got SO many calls on the effective APR. It's a federally mandated disclosure and doesn't mean thats what your REAL APR is. It's just a crappy way of expressing the fees and such on the account.
@Darascon: The ad itself isn't that bad, but I do find it to be pretty hilarious that they label it "Important Information About Your Account".
Can you (commenters) read? I mean it states it in the post that it's reflective of the 1.50 finance charge. Almost every comment above this is like "I dunno, is a 91% finance charge legal?" and "How does that even happen?" and "My guess is this is what happened..." It's all laid out for you in the post. Christ!
The only problem I see is that the guy has had this card for 12 years and has a $1k limit and 25%APR - unless his credit totally sucks he should lose the card and upgraydde (spelled thusly).
Bank of America has a minimum finance charge of $1.50.
If people do not like the way the apr reads on the bill, you have your politicians to thank for that. Do you think a bank would willingly put a number like that on a bill unless they had to ?
I have over 100% "Effective APR" when I did a 0% balance transfer thru BOA and had the 3% fee tacked. So yeah, that number is skewed because of the 3% Fee for the transfer. My account balance is only for the Transfer, and I don't use my card for anything, I just pay down the balance each month, and yes, there is a $1.50 Finance Fee tacked on each month.
If you read all the fine prints, the Effective APR is explained, and is not his real APR.
@SabreDC: I could be wrong, but the "Important Information About Your Account" might not actually be a label for the ad. It might just appear that way because their sections have no dividers on the lower end.
I think you should look up the legal definition for usury in your area and see if this qualifies. In Canada, this would be illegal, as the maximum interest rate, by law, is 60% (I could have sworn it was 50%) per year. If you charge above that, as a creditor you risk losing the ability to collect any interest on the account up to the point you fix the error.
Here is how it works:
Effective rate = (interest + fees)/(balance) so in this scenario 91.29% = ($1.50 + $0) / (balance) so balance = $1.64.
It is clearly spelled out in the terms of service how this all works.
@lalaland13: To everybody: you should go to a credit union! With few exceptions there is really no reason to not. I didn't even have good credit and got a 9.9% fixed APR. The are not in the business of nickel and diming you like the national banks are.
91%... hmmm that is a tad high.
But you have to understand that the $900 Billion for the Obama package has to come from somewhere!
And you wouldn't want the poor bankers not being able to pay their CEO's $50,000,000.00 a year in salary. Now would you?
@ahow628: Close, the balance is 12 times that because it is an annual rate, not a monthly rate. The balance is around $19.80, which everyone would understand if they read more than the headline.
Also, If this guy has had the card for 12 years, why is the credit limit still $1000?
@Jeff_McAwes0me: Good point, I should have used the # of days times the daily rate given to figure the amount. It is probably more like $21.92 ($1.50/.068438).
@SMSDHubbard: To add clarity:
APR = Annual Periodic Rate = Periodic Rate * Number of Periods in a Year
APY = Annual Percentage Yeild = ((1 + APR)^# Periods) - 1
@hypnotik_jello: That would only be true if there was only one period per year. Some credit cards use 1 period per month as @SMSDHubbard pointed out.
It gets more complicated when you factor in some credit cards compound interest daily, use multiple billing cycles to calculate interest, etc. etc.
My advice is find a good financial calculator and learn how to use it. RPN isn't so hard.
@Jeff_McAwes0me: Enlightening post, but with all your talk of reading, perhaps you missed the quote:
"This was my first credit card and I've had it since 1997," writes David. "I only keep it for the history and I only use it every now and then as a backup."
I've got only one card that automatically upgrades my limit semi-annually because I use it daily (and pay it monthly). My first credit card (12 year-old AMEX) has a limit of $1200, but I haven't used it in 10 years.
I don't know what the deal is with my Citibank card, but they just LOWERED my rate from 5% to 3.5% fixed. I have no idea why because I just got the card six months ago and my credit score is completely average.
Seriously some consortium of Phd candidates should try to analyze the algorithms these companies use to assess credit because I'd really like to know. All my friends have 15%-25% rates, and mine are 3.5%, 7% and 9%.
You keep a $1000 credit line with a 24.9% APR open because of the affect on your beacon score? Okay.
@cuchanu: Yes they are, I am about to leave RI Credit union because I find their $3- per month fee annoying. So, basically, I get to pay them $36- per year to have an account with them, or I can go with the local big bank for free? No brainer.
A mere trifle to pay for the privilege for being with such a loving, caring institution. I guess the $25 BILLION free bailout tax money just wasn't cutting it although the President swore on 60 minutes "We don't need it but it was our PATRIOTIC duty to take it". LOL!
He should get a payday loan and pay off his credit card bill.
Sure beats Crapital One's 29% APR...