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Annual Fee
Interest Rate

Calculating Interest Rates

  • Interest Rate :
  • Annual Fee :


Different banks have different policies in calculating interest rates, and this policy or formula is often explained in the terms and conditions that you sign once you activate a credit card. Some interest rates vary daily, and some are fixed. To make things simpler to understand we have used approximations that can help you get an estimate of the monthly finance charges on your credit card.

  1. Determine the monthly interest rate. Some banks charge 3.5% monthly, and some charge only 3%. To simplify, let’s use 3%, or 0.03.
  2. Now, multiply this by the balance remaining on your credit card at the end of the billing cycle. Let’s say your balance is P10,000.
  3. 10,000 x 0.03 = 300

    This means that the interest you need to pay is P30. Your balance at the start of the next cycle is P10,000+P300 = P10,300.

  4. The typical minimum payment required is P500 or 6% of the minimum amount due, whichever is higher. Six percent of P10,300 is P618, which is higher than P500, so you are required to pay at least P618.

This is a simpler estimation. Most banks use a more complicated “daily” computation of finance charges, where they add up all your retail transactions, the principal portion of your instalment availments, retail fees, and the previous day’s outstanding balance. They deduct payments you make during the same day, to get your new retail outstanding balance. Then, they multiply your new retail and new cash advance outstanding balance for the day by the monthly interest rate. The result is divided by 30. This is the finance charge for the day. It is not included in the outstanding balance until statement date. The entire process is repeated everyday until your next statement date.

Be very careful about paying only the minimum amount due, because doing so may mean you’re not even covering the interest fees. If you cannot afford to pay your entire balance off, at least strive to pay twice the monthly minimum.  This will ensure that at least a portion of your repayment is applied to the balance and not just the interest rate.

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Featured Articles:


With all the offers you get form credit card companies, you may feel a little overwhelmed about what kind of credit card suits you best. Here, at, have a few tips for you in choosing the appropriate credit card for you before you say the big “yes” to any credit card company or get carried away with solicitations over the phone or via mail.

Find out your basic goals. Ask yourself; Why do I need a credit card? You can’t just go and apply for a credit card just to be “in” with another crowd.

Next, determine how much you are prepared to pay for the annual fees and how much you plan to spend every month. This will help you start selecting a credit card that is within your budget.

Now do the research. Go to online resources (like to find out everything you need. If you have free time, drop by at the banks to inquire personally about all the things you need to find out. These should include the following:

  • The annual fee
  • Required minimum period
  • Finance charges
  • The credit card issuer providing the credit line and its size
  • The extension period (interest free days) before the payment should be made.

Review all the credit cards your have researched. Base your choice of credit card to the one that bests suits your lifestyle and personality. Always remember to choose the credit card that proposes the BEST DEAL for you. For example, don’t go for a credit that offers you free miles if you don’t have any plans of traveling abroad! Get the point?

Now that you know what to do, start looking up your resources and find out the best credit card suited for you.