# Credit Cards

I just looked at my credit card statement, to see what interest rate I'd be paying (if I ever paid interest on my credit card account -- I don't). It's at 12.99% (APR -- Annual Percentage Rate) on purchases, so I've got a pretty civilized credit card. Some of them are at 20-some percent. I'm sure that they get even higher. I've got a balance of $1767.08. What if I let it ride? [To make our lives easy, let's forget about all the penalties, fees, etc.: just assume that the credit card company will permit us to let the interest accumulate.]

Formula for calculating the Amount *A* after *t* years with compound interest:

A = P( 1 +r/n)^{nt}

- where
- A = amount after time t
- P = principal amount (initial investment)
- r = annual interest rate (as a decimal)
- n = number of times the interest is compounded per year
- t = number of years

Since I have my interest rate expressed as an APR, we can go with

- n=1
- r=.1299
- P=$1769.08

I use my handy-dandy spreadsheet program (the OpenOffice version of Excel), and quickly compute that if I let it ride for 10 years, I'll owe the credit card company

- A=$5993.17

If my company weren't quite so kind, and had a 20% interest rate, then I'd owe

- A=$10941.29

This spreadsheet helps one do the calculations (and consider some other possibilities).