We are struggling to calculate APR on an ODP account. The account is a revolving line, with multiple advances and multiple payments. The finance charge includes interest and advanced fees charges.

Here are some of the figures......Any help would be greatly appreciated.


Finance Charges 51.26
There are 28 days in the cycle
The daily periodic rate is .0004630
The average balance is $482.l4
The annual percentage rate is calculating at 76.872%



Not certain that this is enough information, however, if someone could just tell me how to calculate it......Perhaps we could figure why the annual percentate rate is so high or even if it correct at all.......

We need to be able to explain to the customer...


Thanks

You will need to calculate the finance charge on a day-to-day balance method. That's the only way to come up with the correct finance charge as it is changing throughout the month, so far as I know of.

It appears your simple rate is 17%-365/365.

I imagine you might get better and more thorough response from this if you moved it to the lending forum, however.

^ Yeah, as joker stated, the simple interest rate should be your daily rate times the number of days in your interest year (0.000463 * 365 (?)) = 16.90% to be more precise.

The account's finance charges should be a result of the interest rate entered into the system for that account (not the other way around).

Yes- but if the advances trigger an "advance fee charge" as indicated in the orignal post - those finance charges are also included in the APR calculation. See Appendix F of Regulation Z for the details on how to calcuate APR on open-end credit that involve specific transaction charges.

It appears that the finance charge related to the periodic rate is $6.26 and there are $45 in advance fees.

The combination of finance charges resulting from application of a periodic rate and fees that are finance charges often results in an APR that is very high for that one billing period where the fee related finance charge is assessed. This happens often in the credit card world.