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The Cost of Credit

To find out how much you pay your creditor each month for the luxury of using credit go through these steps:

1. Subtract your payment from the balance: $100. $25 = $75.

2. Look up the annual interest rate for your card, then figure what the monthly rate would be.
Yearly rate, 18% (.18) divided by 12 months = .015

3. Multiply your answer by the monthly interest rate: $75 x .015 = $1.125

4. Add the answers of steps 1 & 2:
$75.00 (payment)

+ 1.13 (interest)
= $76.13

Your new balance is $76.13. You paid your creditor $1.13 this month for the luxury of owning a credit card.

5. Find the new balance for each month by going through the above steps.

 
Balance
Payment
Interest Rate
January      
February      
March      
April      
May      
June      
July      
August      
September      
October      

You may want to include formula for calculating total payments over time.

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