Am I really stupid? My credit card...

[Rosoi]

Is 39.9% APR
I've never had one before
Always avoided but ended up with one.

I pay my balance in full every month because I thought that 40% Apr meant that if I owed £100 and just made the minimum payment that 40% would be added and I would then have £140 to pay off.

That isn't true is it??

It's 40% per annum, each year. You would pay back £140 if you kept the debt running for a year, not for a month (in fact more than £140 because interest accrued each month on last month's interest!).

39.9% APR ! < faints >

Hiya yes it's interest paid on the amount owing, so if you pay the balance every month you pay no interest. Even better are cards that give rewards, usually small but still worth it

I think mine is 35-odd%. It was 0% for 6 months and then I never changed it. To be fair, it’s rarely used and is always cleared within a month or two so the interest doesn’t really affect me.

The monthly interest rate would be roughly 4.87% (39.9% / 100 / 12)

So £4.87 in the first month,

Second month you would pay interest on £104.87 (assuming no repayment)

Minimum payment is likely to be £5.00 so at the end of the year you would still owe roughly £100 by making the minimum payments only.

Well you aren’t stupid as you realise that not paying it off in full every month is a bad idea . I’d say that’s the opposite of stupid.

I've never had any credit so that was the only one available to me. A credit builder!

But yes. Always paying in full is the best and cheapest option.

Haven’t read the small print for your card but generally speaking if you don’t pay in full then there is no interest free period on your purchases so everything you buy on the card costs more. Something else to take into account when you use your card..

If you pay it off in full every month it doesn't matter what the interest rate is because you never pay interest. It could be a million percent a year and it wouldn't matter.

It's also good to use your CC if prevents you from going into overdraft because the delay in the credit card bill compared with the immediacy of an overdraft will mean money stays in your account longer, so you don't pay overdraft interest, which is also 40% APR.

Banks also see use of a credit card as responsible money management, whereas use of an overdraft is the opposite.

This is an important point and something I got caught out by years ago. I paid off something like 90% of the balance and was horrified by the amount of interest charged the following month. I complained to the bank but they said that's how they worked. Never made that mistake again.

No, what that means is, if you put £100 on your credit card in January and don't pay any of it off then by December you will owe £139.90

It's 2.8375% per month. So, if you don't pay it off at the end of the first month then you owe £102.83. If you don't pay it off the next month then the interest is added to this larger figure of £102 so you end up owing £105.75. This carries on increasing every month until you get to owing £139.90 at the end of the year.

monthly interest on 39.9% APR is 2.8375.

If you think of it as 100 x 1.028375 x 1.028375 ... (12 times) = 139.9

But your math ignores the compounding if the internet. The interest added in the first month is added to the amount owed in the second month, so the interest due that month is higher. This then gets added to the amount owed and so on. So, at the end of the year, the total amount is more than $139.99

"But your math ignores the compounding if the internet."

No it doesn't. Just stick those figures into a calculator if you don't believe me.

"...at the end of the year, the total amount is more than $139.99"

If the total amount due is more than £139.90 then that means the APR is greater than 39.9% and the credit card company are breaking the law by giving an incorrect APR.

Carry on paying in full. Interest always leads to a growing bill and future trouble unless to get you out of an unavoidable temporary emergency.

It's 40% per year, not per month. Plus if you owe £100 and make the minimum payment, you owe less than £100, so the interest would be very slightly less than the amount calculated by @Another2Cats, but not much.

Basically, don't keep a large balance long-term. But if it enables you to buy something that you can pay off in 2 or 3 months, don't worry too much about it. What causes the damage is (a) a big balance and (b) only paying off the minimum every single month. That's just kicking a huge can of pain down the road.

As a result of horror stories about people who weren't able to psychologically copy, a lot of people aren't using credit cards when they could be a sensible way to deal with unevenness between monthly income and occasional larger outgoings. Also they get you quite good purchase protection. So don't cut it up just yet — just also don't imagine that your credit limit is free money.