[jugad]

Thanks for the detailed reply. I look forward to your website updates and the future simplification of the credit industry.

I also find it a little surprising that the 30 day numbers are missing from your simple interest page... that's the single most important time frame, given that its common to everything that we are talking about.

I did some numbers on the 5k outstanding debt. After 30 days, simple and compound interest difference, on 5k debt looks like this...

  compound interest total : 5074.50
  simple interest total : 5073.97
  difference : 0.53

So, a regular joe would save 53 cents a month on debt of 5k, if they pay off more than the interest every month.

Also, you seem to be putting a lot of emphasis on the evils of minimum payment in your comments... and if the minimum payment is less than the monthly accrued interest, that is EVIL. I hate paying a single cent to the banks in interest, and have had enough money to pay all debts in full every month. So I never felt the need to study the minimum payment booby trap in detail. But if banks are doing that... I hope you succeed in derailing them.

Good luck convincing people to be financially responsible, while other banks are inviting them to be irresponsible.

I think building a story around "avoiding the minimum payment booby trap" might be useful... but its a complicated story to tell in a way that an average joe with a short attention span can understand.

[sksk]

One more thing. 30 days is not the right point as payments are usually due 28 days after the statement is issued and most people (people who carry a balance) pay closer to the end -- all this while things are getting compounded. So your 0.53/mth will be more like 0.9/mth in practice.

As you could this gets into a lot of nuances on how people use credit cards today. We attempted to keep things simple and it lead to a totally different issue, which you raised. We will try to revise it to make it more like a what a user will do over the life of their debt and compare. Again, financial delta for each user is not the issue but rather the 'fairness' of this whole thing -- how does compounding really benefit the consumer?

[sksk]

Yup, your example will amount to $.53 * 12 = ~$6 / year (assuming no deferral). Typically people end up staying in debt for a few years (4-6 years) because of the way the banks structure payments. So you may conclude, what the heck, $25 more over 4 years, why do I need to care? But you need to look at the system as a whole to address this problem. Finance is a very low return game (as % of assets) so people try to make $1-2 by charging this or that and in grand total adds up to billions. That's why nobody in the industry will switch to Simple Interest. I don't think our value prop is just saving $6/year (assuming interest rate is the same) -- it is really about doing the right thing for the consumer and keeping it simple.

Oh btw, I am comparing compound interest like how a normal person will calculate it. A credit card company does not do it this way. It is a mess and it not trivial to reproduce their calcs.

Regarding minimum payment: the evilness is not whether interest is being required at the end of the month or not (in non-deferred situations they are) but how artificially low they set minimum payments. For example, my Chase card is 1% of principal. ~40-50% of the people only pay minimum payment in the US and imagine paying at 1% principal, will take you 8-9 years to pay it off. If you change the payment just a little bit (even $50-100 / mth more) can dramatically lower your overall costs.. the credit card companies fought tooth and nail to not put 'minimum payment warning box' saying it is confusing (the idea behind the box was to tell the consumer how much the payment should be to pay it off in 3 years). Wouldn't you want as a consumer to know what's the right thing to do? We have treated credit card companies like doctors -- let them decide what's right for you. That's why we got into the financial crisis and we can do better.

We know consumers are not just going to give up on credit cards and that's why we built SimplyCredit to work on top of the existing system instead of trying to create a new one. They don't need to change anything but they now have a better financial product. Our customers not only like the convenience but also the fact they know exactly what they are getting into and there is a company that is not trick you into paying more.

Check the first link: https://www.google.com/search?q=Citigroup+to+Pay+%24770+Mill... Also check: http://blogs.wsj.com/moneybeat/2015/07/16/credit-card-fee-in...

I am glad you have not paid any interest to these credit card companies. Our hope is that we can make more and more people like you. They made ~$100+ billion in revenue just from interest charges and I think it is time to put an end to it.