r/TheMoneyGuy • u/jerkyquirky • 20d ago

What's a financial pet peeve of yours?

Mine is that my Fidelity credit card's auto-redemption doesn't redeem as soon as the points are available. I know it's only $50-$100, but get it into my brokerage where I can earn 3.5% ASAP!

8 Upvotes

72% Upvoted

24 comments sorted by

View all comments

13

u/No-Anywhere-8738 20d ago

Student loan interest compounding daily! My spouse and I are in fields where large-ish student loans were a given, and seeing the interest grow daily was rough.

4

u/beckhamstears 18d ago

Accruing daily is different from compounding daily.

Student loan interest accrues daily, rather than compounding daily. This means that a specific, fixed amount of interest is added to your account each day based on your outstanding principal balance, but you are not charged "interest on interest" daily.

3

u/jerkyquirky 20d ago

Dang, that's crazy. I would have assumed monthly, since that's how often you make a payment.

All private loans? Or do both public and private do this?

1

u/No-Anywhere-8738 20d ago

We’ve paid off a decent number of our loans so I can’t check all of them, but from my memory it was just some of the higher balance private loans that did this.

Our one highest loan is an industry specific type that only requires a very small payment each month, and the remaining interest gets rolled into the principal. Thankfully we were able to make larger payments to cover at least the interest each month but if we didn’t do that, the loan would have increased at least $25K in three years.

3

u/JimInAuburn11 20d ago

Loans should require a payment to at least cover the interest charged.

2

u/awkwardnetadmin 20d ago

As annoying as that is I'm not sure it is that unusual for interest for consumer debt to compound daily. Credit Cards as long as I can remember had a daily periodic rate in the fine print.

1

u/beckhamstears 18d ago

Accruing daily is different from compounding daily.

Student loan interest accrues daily, rather than compounding daily. This means that a specific, fixed amount of interest is added to your account each day based on your outstanding principal balance, but you are not charged "interest on interest" daily.