If you get a 1% fee in a month on $1000, that would be $10. In 12 months for that same $1000, you would have $120 which stated annually, would be about 12% on the $1000. But, that is only if it is the same $1000 over and over each month. Your point is that it will take $12,000 to achieve this as you are paying out $1000 each month to maintain the average monthly balance of $1000 and that would make the annual rate about $1.2%. I see what both of you are saying but since this is a fee on a credit card, if I remember what started all this, it would be the 1.2% average balance. Am I seeing it correctly?

 

Yes you are confused.
This post shows you are using percent gain and APR interchangeably ( let alone you do not understand what is meant by APR as your post above shows )

I am starting to see why so many people have problems with money, basic money concepts must not be learned anymore.

 

I am not using them interchangeably. I am also not confused. You are using it incorrectly as I have clearly explained multiple times. APR IS THE COST PAID TO A BANK FOR GETTING A LOAN FROM THEM. It does not apply to your 1% cashback that you magically converted to 12% APR to make Alex look like he was wrong to be leaving 13% free money on the table. When there are no fees or costs on a loan the APR is equal to the interest rate. You do not simply multiply the rate by 12. If that were the case the CC companies would call it a 12% cashback plan.
So to use the analogy you were set on to argue with Alex I made a simple example to show how it works and the math. You still completely missed it because you are so set on being right.

Point made. Alex is only missing out on 1% free money because he chooses not to take advantage of a 1% cashback CC because he knows he would not be disciplined enough to not spend more than he can pay each month.

Lets agree to disagree. I disagree that you are right and you disagree that I am. We can agree on that.

 

At least the 2nd time.
Nothing in the definition of APR states that it is interest earned or interest paid.
How are banks using APR on a CD rates, if it only a term used in a loan by your definition ?
Go look at any bank site. APR & APY are both given for a CD or any other deposit account type.
Do you believe banks do not know how to use APR, where you do ?

APR = Percentage rate per 12 months.
- That is it, nothing else is implied in the term APR.

If you go to a site about loans, APR is only talked about in terms of loans ( just like the site does not talk about pumpkins ).
Expand where you are getting your definition from to include any bank site that has deposit accounts. You will also see APR there as well.

Nothing magic about it, it is called basic math.
The given month pays at a rate of 12% APR, else you would not get 1% in interest on the money for a single month. I said it BlueJay said it.

Per month he is missing out on making money at the rate of 13% APR, not a 13% gain.
- You say you are not using them interchangeably and make incorrect posts like this, and sign my name to them.
I never said he is leaving 13% free money on the table.

No a 12% cash back in 1 month would be 144% APR.
Go look at what APR actually means. The interest paid per 12 months.
You seem to remove the term part of APR, and use it the same as percent gained.

Let's get percent gained and APR correct before we go any further with the conversation as you seem to still using them interchangeably.

You have $ 1,000.00 in your sock drawer.

In JAN you open a 6 month CD paying 1% APR ( it is more like 0.7 % APR, just using round numbers to make the math easy ).
Deposit all 1,000.00 into it.

Using simple interest, the bank hands you back $5.00 in interest and your principal at the end of the CD in JUN for a total of $ 1,005.00
In JUL you put the money back in your sock drawer until DEC.

The percent gain on your money is 0.5% ( $ 5.00 in interest on $1,000.00 ).
The rate you were paid at is 1% APR on the deposit.

Got it yet ?

------------
The non round numbers on a 6 month CD paying 1% APR, compounded monthly are :

APR = 1%
APY = 1.005%
The amount the bank hands you back at the end of 6 months is $ 1,005.10 due to making interest on the interest of the previous month or what is called compounded interest or APY.

 

Keep going. Just keep twisting words to fit your side. Personally I would save your breath. First rule of holes: when in one stop digging. You are the one that needs to look at what APR means. Also try some algebra. No mater how you spin it you cannot turn a 1% return on an investment into a 12% APR. You keep going off on tangents instead of sticking with the simple example based on the topic of the thread.

 

No twisting no tangent, just trying to get to a base line.

Let's try it this way :

Please tell me what the interest is for the 1st month on a $ 1,000.00 principal at 12% APR.

Easy only 1 correct answer.

 

Not playing your game anymore, sorry. I showed my math already. Have a nice weekend.

 

No games, and no you did not show the math on the question about APR, you showed math on percent gain.
If you feel you already showed that, we are back to you are confusing percent gain and APR.

Here it is, just so you see where I got the answer from.

1,000.00 principal at 12% APR

1,000.00 * .12 = 120.00 in interest for the year.
120.00 / 12 = 10.00 interest for the 1st month.

Look at that $ 10.00 on $ 1,000.00 for the 1st month @ 12% APR.

don't believe me or BlueJay :

This is from the URL above, the one you conveniently ignored :



If you are not going to believe basic math, I guess you would think you need algebra or magic to figure this out ( which neither are needed for it ).

 

I have no problem with that calculator. Nice try but that is just a simple interest calculator. You have already told me not to mix up actual interest with APR. Calculator shows the same thing I showed you but for a 1 year loan. It does not apply to 12 one month loans as nothing carries over from month to month. As I have said and stand by APR does not apply to CC rebates. APR is your cost to get a loan, interest is only one part of the equation. Fees and costs are the other pieces. If there are no fees and costs interest equals APR just like it said on the website I linked that you conveniently ignored because it did not support you argument.
If I went to my bank and got a no cost no fee loan for 1000 and they said it had a 12% APR at the end of the year I will have paid them $1120. If I got the same terms for 12000 I would have to pay them $13440. Simple math. Because there were no fees the interest matched the APR. Using the CC 1% cashback scenario you are only getting $120 back by the end of the year for your 12 1% $1000 one month loans not $1440. Understand? I only suggested the algebra so you could use it to explain your magic.
Thanks for playing. Have a nice weekend.

 

I never said anything about actual interest. Don't know where you get this at.... I said do not confuse 13% APR with a 13% gain.
- Find in thread actual Actual error or Actually is my posts...
- You love changing terms to this don't you ? Shocked me contract 101 had to bring this up, now I know why. pick one and stick with it.

Try READING the 1st line :
You want to calculate the interest on $1000 at 12% Interest per year after 1 month(s)

See that, term is 1 month..

And it shows that when you make 1% per month, the APR is.... ( you can see it right on the calculator that you have no problem with ).

I never disagreed with the part that the interest + any applicable fees = the rate.
The part you cannot digest ( and I disagree with ) is the rate is per year, a full 12 months. Thus the name Annual Percentage Rate
1% gain in a single month is not earning at 1% APR.

And what is the APR you are paying per month ?

You are almost there.
And once you cross the finish line you will get how missing out on earning money for the month at 13% APR is not the same as missing out on 13% of free money.

 

I had an epiphany on the way home. You are treating the 1 month 1% loan as if it was one twelfth of an one year loan and this is why you get it wrong.
Here is a hypothetical for you: Lets say your credit card company says to you " Mr. Scully you are such a good customer we are going to waive all interest and fees for one year"
Using my example you decide to let them pay the bills @ 1000 each month and you give them a check for 12000 in December. This is the same 12000 you would have given them monthly to avoid fees but you decided to take advantage of their good natured offer of no fees or interest. They still have the same 1% cashback and you still get $120.
I have not changed any terms. You are misapplying them. I am just obviously not doing a good job of getting my point across. Merry Christmas!

 

What is the 1% ? you do not label it.
1% APR ? This is not correct, and not what I am saying ( but you did say earning 1% on your money for 1 month is 1% APR up in post # 79 ).

Earning interest of 1% on your money for 1 month, is getting paid at 12% APR for 1 month.
The interest calc above shows this ( you were good with it before, now ?? )

Don't like that one ?
How about this one ?


Don't like either of those two?
How about this one ?


Don't like any of those 3, how about this one ?


BTW : Read the bottom of this one, it shows the formula for interest for 1 month given the principal and the APR.

This is 4 interest calculators that show 1,000.00 for 1 month @ 12% APR = 10.00. $10.00 is what percentage of 1,000 ?

How about you focus on understanding earning interest for one month @ 12% APR before you go off the deep end into something else.

 

I'm not getting too deep into this argument, but if you spend $100 on your credit card and pay it back every month and receive 1% back per month you will receive $1 per month. At the end of the year you will have $12. $12 is what percent of $1200? It is only 1% (that is where Norm is coming from), but you are correct it is 12% APR, because it is figured on your expenditure of $100 not $1200. If the same $100 was a short term loan taken for one month (which looking at it from the bank's perspective it is a short term loan with negative interest) what would the APR be if the interest payment was $1 for that month? In this case you would have to annualized the interest paid. It would be $12, but your loan amount stays the same at $100. $12 is 12% of $100. Looking from the bank's perspective: They loan $100 for one month. Then they have to pay $1 on that loan. What is the bank's APR on that loan? -12%. Here is my favorite amortization calculator. http://www.bankrate.com/calculators/...alculator.aspx Punch in the numbers and have it do the calculations for you. I think the disconnect is that you are converting this refund to an APR when it isn't interest.

 

The nominal APR is calculated as: the rate, for a payment period, multiplied by the number of payment periods in a year. However, the exact legal definition of "effective APR", or EAR in short, can vary greatly in each jurisdiction, depending on the type of fees included, such as participation fees, loan origination fees, monthly service charges, or late fees. The effective APR has been called the "mathematically-true" interest rate for each year. The computation for the effective APR, as the fee+compound interest rate, can also vary depending on whether the up-front fees, such as origination or participation fees, are added to the entire amount, or treated as a short-term loan due in the first payment. When start-up fees are paid as first payment(s), the balance due might accrue more interest, as being delayed by the extra payment period(s).

In some areas, the annual percentage rate (APR) is the simplified counterpart to the effective interest rate that the borrower will pay on a loan. When not using the term "effective APR", the use of "APR" is an early term for nominal APR. In many countries and jurisdictions, lenders (such as banks) are required to disclose the "cost" of borrowing in some standardized way as a form of consumer protection. APR is intended to make it easier to compare lenders and loan options. The APR is likely to differ from the "note rate" or "headline rate" advertised by the lender, due to the addition of other fees that may need to be included in the APR. APRs can be found by asking the lender or by reading the appropriate section in the contract.

In the U.S. and the UK, lenders are required to disclose the APR before the loan (or credit application) is finalized (although the definition of "APR" is not the same in the two countries-–see below). Credit card companies can advertise monthly interest rates, but they are required to clearly state the annual percentage rate before an agreement is signed. APR is a term used with regard to deposit accounts as well. However, when dealing with deposit accounts, the annual percentage yield (APY) or annual equivalent rate (AER) is quoted to consumers for comparison purposes.

 

Thank you. Common sense and basic math strikes again !

I have never denied the 1% percent gain part ( post #75 )

My post that started this mess 30 some posts back :
This is where Norm got it made a total of 2% ( 1% APR on the account, and 1% cash back ).

Back in post # 87 Norm was good with calling the the cash back a form of interest from "It is a fee paid for an amount. Is that not interest in it's most basic form ?"

The hang up is Norm has it stuck in his head that you do not really have an APR if it is only a one month loan and APR is dependent on the length of the loan not the standard term of 12 months.

2nd confirmation ( aside from 5 interest calculators ) that by not using the credit card to charge the amount instead of paying cash, is missing out on earning 13.1% APR on your money, until you pay the bill at the end of the month.