Shopping Credit Cards Explained

Updated: Feb 18, 2023

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Calculating shopping credit card interest

You can calculate the interest of your merchandise cards in 3 simple steps. It might look complicated at first, but once you understand it, you will be able to do it in just a few minutes. To do this properly, you will need the card billing statement because it contains some vital information. Here are the 3 steps you need to take:

Step 1: Calculate your daily rate

Given the fact that the credit card interest is calculated daily, the first thing you need to do is calculate your daily APR. Simply divide the APR by 365, and you will get your daily periodic rate or periodic interest rate.

Step 2: Calculate the average daily balance

When you look at your statement, you will see the days which are included in the billing period. The interest charge you get is determined by the balance you have on these days. Start from the unpaid balance which is the amount you carry from one month to another. When you purchase something, this balance rises, and when you make payments, it drops down. Look at the transaction information and go over each day in the billing period and write them all down individually. Once you’ve done that, add all daily balances. When you get the result, divide it by billing period days. This is how you will calculate the average daily balance.

Step 3: Combine them together

The third step towards calculating your interest is to multiply the daily rate by your daily balance. The result you get then needs to be multiplied by the number of billing period days. Your result might vary slightly depending on how the issuer calculates your interest, but the differences won’t be significant.

Calculate your interest regularly as a lot of shopping cards change it really often.

Minimum payments and cards for shopping

The shopping card minimum payment is the minimum amount that absolutely needs to be paid each month. It’s a vital part of the agreement terms. In case the card owner doesn’t make the minimum payment, he or she can expect charging fees. They can also lose special rates. If the cardholder skips multiple minimum payments, the card will get defaulted. This means that you won’t be able to use the card. The issuer will ask you to give it back and repay all of the credit debt you might have.

What is the minimum payment for shopping cards?

The minimum payment amount is different from one card to another. It all depends on the shopping card offer and the company that issues them. However, with card offers for shopping, the minimum is generally around 5% of the total amount that the holder owns. It’s usually higher than with general-purpose credit cards because shopping offers have higher interest rates. However, shopping cards also have a lower credit limit.

What this means is that, even if you have a 5% minimum on your balance, it could be lower than the 2.5% minimum on general-purpose credit cards as their balance is quite higher. When getting a store credit card, you will get information about the minimum payment. Additionally, when you already have one, you can check the exact minimum payment on the card statement.

Merchandise credit cards and credit score

A lot of people get offered a shopping credit card at the register to get a discount, and without thinking, they get one. However, making this decision impulsively is not always smart because you can end up hurting your credit score. However, when using the store credit card the right way, you can actually use it to build your credit. It’s a double-edged sword, and you need to know all the factors that affect your credit score so that you can make informed decisions.

Credit score explained

The credit score is determined based on the information in your credit report. A credit score is basically a number that tells lenders how reliable you are for loans in different kinds of forms. Lenders assess potential customers by determining their credit scores. However, all lenders use different criteria for assessing potential customers, and they might give you a different score. However, the number won’t be that different. The credit report information you provide to lenders when getting a credit card lets issuers determine:

  • If they will give you a loan
  • How big your interest will be
  • Which amount they should lend you

The latest information you have on your credit report has the most significance because lenders are mostly interested in your current financial state. All the financial decisions you’ve made in the past 5 years will be laid out on the record. Maintaining your credit score on a regular basis is essential because it can help you get the best credit cards, financial contracts, and loans, and help you get better conditions in any kind of financial deal.

Card Offers That Report Your Credit Monthly


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