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On a credit card, for people struggling unable to pay it off in full every month, what's the difference between "annual percentage rate" and "monthly interest rate" for unpaid balance? (lemmy.world)

submitted 1 month ago by LemmyKnowsBest@lemmy.world to c/personalfinance@lemmy.ml

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For example some credit cards have ridiculous monthly interest like 29.9%

While offering a low 0.9% APR.

Please explain.

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[–] jeffw@lemmy.world 9 points 1 month ago* (last edited 1 month ago) (11 children)

I think you’re mixing it up. Nobody actually gets 30% interest in a month. That’s the APR.

roughly speaking, your monthly interest is 1/12th of the APR.

Edit: payday loans might actually get that high tbh… but that’s a separate issue. Credit card APRs will be around 25-30% most of the time

[–] LemmyKnowsBest@lemmy.world 0 points 1 month ago (10 children)

Oh sweet. So I'm completely debt free at the moment but one of my credit cards just increased the limit and gave me 0.9% APR until March 2026. So would this be a good time for me to max it out 😬? I would easily pay it off within 6 months. I drive a Mercedes, fully paid-off, I own the title, and last month the dealership mechanic quoted me $6,000 in maintenance costs for some little issues to fix to keep it good as new. And I am so tempted to dive in and accept their quote. But I would need to use my credit card to do that. 😬 Wise? Or unwise?

[–] jeffw@lemmy.world 5 points 1 month ago

I would never max out credit. That’s bad for your credit score. And those tempting offers are great until you don’t pay it all off and get slammed with interest.

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