Talk:Credit card interest

Untitled
24 Jan 2012

Under "methods for charging interest" there is a reference to U.S. Regulation Z. The reference mentions that there are four approved methods, with explanations to follow. I would like a link to the mentioned regulation. i.e. http://www.fdic.gov/regulations/laws/rules/6500-1500.html#fdic6500226.14 I understand that external links should be limited and if entered, directly related to the subject of the article. Since a notice is in place not to add links, I am asking for others to comment. Currently there is one link in place, that in my opinion is not really appropriate. In addition the four Wikipedia methods listed differ from what is seen in the actual FDIC regulation.

Please comment. — Preceding unsigned comment added by Markbeckstrom (talk • contribs) 20:05, 24 January 2012 (UTC)

I have added back the first External Link that MonkeyMan has repeatedly deleted. While I will admit I am associated with this site, I do not understand why it is singled out as a commercial link. The information is relevant to this category, and it is as informative as the other two links. In addition, the link to bankrate.com is a commercial link as well but has not been getting deleted.

I see another user reverted all the links back in, and then only the top one was again deleted.

I understand Wikipedia is not a repository of links, but don't relevant links add to Wikipedia's usefulness?
 * Hi 68.9.46.230. Please understand this issue from Wikipedia's point of view.  We get tons and tons of people trying to add their links to articles in wikipedia solely for the purpose of driving traffic to the site and earning a profit.  We see this on an hourly basis day after day.  I personally don't see the value in your site.  You've got some 'average credit card rates' but it doesn't explain how these are calculated and I don't really see how this is helpful to anyone.  We see links like these all the time.  Someone will create a small site, throw on some 'useful' information and then try to pass it off as a legitimate link.  If you want to advertise your site, why not go with google or yahoo advertising?  As a good faith effort, I wont delete the link but someone else will come along and identify it as spam.  [[Image:Monkeyman.png]]Monkeyman 16:27, 9 February 2006 (UTC)

Well, I appreciate your leaving it there, and obviously I do believe there's value in the site. If someone else deletes it, I'll assume that is the will of the wikipedia community. I understand your reasoning for removing it, but the site's credit card averages and other info have been used by many media outlets and have been well-researched -- the averages provide info to let people know what they might expect to find in the market, and it also shows trends over time. I wouldn't characterize them as simply "thrown up" to try to pass them off as useful information. Again, though, I'll leave that up to the wikipedia community from here on out.

07 May 2006--Removed proof of trivial difference between interest calculation methods
I may be wrong, but there was an apparantly very excellent analysis of the difference between interest rate calculation methods Average Daily Balance (as used in the USA) and Daily Accrual (as used in the UK). The result was that the monthly interest is slightly higher or lower (than with the other method) depending upon the number of days in the month, but the same over the year. (Mathematically the annual computation is exactly the same--just two different orders of calculation for arriving at the average). Although clearly excellent, with mathematical symbols and everything, I removed it, and replaced it with a discussion of differences between calculation methods, because the difference in charges between the two methods is trivial, especially when compared with the myriad of exceptions, charges, incomes, and marketing offers that the banks make. It might be nice for readers to see the proof that the difference is trivial, but usually an encyclopedia is expected to summarize such academic detail. Feel free to add what you think. —The preceding unsigned comment was added by 70.162.103.106 (talk • contribs) 20:03, 7 June 2006 (UTC)


 * The right thing to do then is copy it to the discussion page. So I did. 71.199.123.24 05:16, 7 July 2006 (UTC)

Difference Between ADB and Daily Accrual
In the United Kingdom, the two most common methods of calculating interest are Average Daily Balance (on cards issued by Barclaycard) and Daily Accrual (on cards issued through First Data).

In the Daily Accrual method, taking m to be the number of days in the billing cycle, the following formula is used to calculate the charge:

$$\sum_{d=1}^{m} (bal_{d} * rate_{daily})$$

In the ADB method, the following applies:

$$\sum_{d=1}^{m} (bal_{d}) * \frac{rate_{monthly}}{m}$$

$$\Longrightarrow \; \sum_{d=1}^{m} (bal_{d} * \frac{rate_{monthly}}{m})$$

Ergo, interest could be considered to be accruing on a daily basis, at a daily rate equal to the monthly rate divided by the number of days in that billing cycle. In this way, the method is equivalent to a variable rate daily accrual, with a daily interest rate that changes month on month depending on the number of days in the relevant billing cycle.

From a consumer point of view, this then allows a more direct comparison between the merits of the two methods. For example, let us assume that a customer carries a debt of $1,000 for fifteen days before paying it off. In the daily accrual method, the interest charge will be:

$$\ (1000 * rate_{daily}) * 15$$

$$\rightarrow \;15000 * rate_{daily}$$

$$\rightarrow \;15000 * (rate_{monthly} * \frac{12}{365})$$

$$\rightarrow \;15000 * \frac{rate_{monthly}}{30.4}$$

In the ADB method, the charge will be:

$$(15 * 1000) * \frac{rate_{monthly}}{m}$$

$$\rightarrow \;15000 * \frac{rate_{monthly}}{m}$$

It can therefore be concluded that if the billing cycle exceeds 30 days, then the interest charge will be lower under ADB. However, if the billing cycle is equal to 30 days or less, then Daily Accrual will be better value for the consumer.

Sentence Removed
The following sentence was removed, because it was felt that it did not conform to a neutral point of view. If it is believed that this sentence is vital to the article, then please rephrase it to conform to Wikipedia standards.
 * "Many people in the USA complain about high interest rates (at any rate higher than what they are used to), with interest rates in other countries giving a new perspective."ndyguy 21:24, 11 August 2006 (UTC)

Likewise, the two sentences below were removed. They do not appear to conform to WP:NPOV.
 * "Interest is criticized for being confusing to cardholders who also tend to lack self control and buy compulsively using whatever resources are provided to them, letting the bank profit on something that may not always be of true benefit. The response usually given in return is that consumers should educate themselves about how to make rational decisions regarding their power to purchase on credit card accounts."

(Sugar Daddy 02:35, 3 September 2007 (UTC))

Principle vs Principal language error?
The original loan amount is referred to as the principle in this article. My impression is that the correct term is principal.

Interest rate section:
In 'interest rate' section, what is "...even though inflation seems u per annum..."? I can't figure out what was meant, or I'd fix it myself... 71.139.166.86 (talk) 06:26, 27 December 2013 (UTC)