Credit Cards
Senior Member
Joined: Mar 2001
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From: Seabrook,NH
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?
Senior Member
Joined: Mar 2001
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From: Seabrook,NH
APR is your cost to the bank for taking out a loan. It includes all fees and principal. The only reason actual interest differs from APR is because of those fees. Simple fact. No math needed.
When there are no fees APR is equal to interest rate. Another simple fact.
APR does not apply to cashback rewards because it is a rebate and not your cost to get the loan.
If you choose to use the APR analogy and treat each month as a single 1000 dollar loan with a 1% cash back and want to turn it into an APR (Y) it is still 1% because there were no fees involved. Because the transaction was completed in 1 month you cannot multiply by 12 and call the 1% a 12%APR. Why? Because nothing was carried over for a year. It is not one twelfth of a loan. If it were and carried out to a 1 year term I might be inclined to agree with your analogy. Unfortunately for you it is not. You have 12 1 month "loans". Each one earned 1%. At the end of the year when you add up all of your little "loans" and add up all of your cashback rewards you still only have a yield or gain of 1 %. There is no APR and no matter how you twist it to fit your argument there is no 12% anything.
Good morning. Have a great weekend. I hope no offense was taken and I am now sorry I tried to make a point. Sorry for wasting everyone's time.
Merry Christmas.
When there are no fees APR is equal to interest rate. Another simple fact.
APR does not apply to cashback rewards because it is a rebate and not your cost to get the loan.
If you choose to use the APR analogy and treat each month as a single 1000 dollar loan with a 1% cash back and want to turn it into an APR (Y) it is still 1% because there were no fees involved. Because the transaction was completed in 1 month you cannot multiply by 12 and call the 1% a 12%APR. Why? Because nothing was carried over for a year. It is not one twelfth of a loan. If it were and carried out to a 1 year term I might be inclined to agree with your analogy. Unfortunately for you it is not. You have 12 1 month "loans". Each one earned 1%. At the end of the year when you add up all of your little "loans" and add up all of your cashback rewards you still only have a yield or gain of 1 %. There is no APR and no matter how you twist it to fit your argument there is no 12% anything.
Good morning. Have a great weekend. I hope no offense was taken and I am now sorry I tried to make a point. Sorry for wasting everyone's time.
Merry Christmas.
Technical Article Contributor
Joined: Jun 2002
Posts: 10,511
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From: Under the flightpath of old ORD 22R
...<snip>...
If you choose to use the APR analogy and treat each month as a single 1000 dollar loan with a 1% cash back and want to turn it into an APR (Y) it is still 1% because there were no fees involved. Because the transaction was completed in 1 month you cannot multiply by 12 and call the 1% a 12%APR. Why? Because nothing was carried over for a year. It is not one twelfth of a loan.....<snip>...
If you choose to use the APR analogy and treat each month as a single 1000 dollar loan with a 1% cash back and want to turn it into an APR (Y) it is still 1% because there were no fees involved. Because the transaction was completed in 1 month you cannot multiply by 12 and call the 1% a 12%APR. Why? Because nothing was carried over for a year. It is not one twelfth of a loan.....<snip>...
It is 1/12 the APR multiplied by the principal to get the interest for 1 month or the 1st month of a 1 year or 3 year or 30 year loan.
You really do not know what APR is or how it works if you think 1% per month and 1% APR are the same thing.
Read the definitions that you posted :
The effective APR has been called the "mathematically-true" interest rate for each year
I can say with 100% certainty, that a 1% APR loan for 1 month on $ 1000.00 is not $ 10.00 in interest.
I can say with 100% certainty, that a 12% APR loan for 1 month on $ 1000.00 is $ 10.00 in interest.
The 4 screen shots above show this.
Instead of just posting words, go to an interest calculator and try it for yourself, and get the screen shot of it.
Stop already with your instance that APR is for loans only, your post above shows that is applicable to deposit accounts as well and you agreed that the rebate is a fee for an amount, and this is interest in it's most basic form.
Without APR on a deposit account, what are you multiplying by 1/12 by the principal to get the 1st month interest ?
APY is the yield from compound interest, but in the 1st month you do not have any interest yet to compound.
Stop just posting words as contrary, and get a screen shot of an interest calculator that shows :
APR ; 1%
Principal :$ 1000.00
Term length : 1 month
Interest : $ 10.00
I have showed you 4 that confirm :
APR : 12%
Principal :$ 1000.00
Term length : 1 month
Interest : $ 10.00
Without external verification, you cannot prove your point.
You can insist on it, but insisting is using opinion as fact.