Credit Card Balance Payment Basics
Credit cards offer convenience, consumer protections and a quick way to build your credit history. Depending upon how you use them will affect your credit and your ability to borrow money in the future. Unfortunately many Americans struggle managing their use of credit cards, and pay a price for this. Credit cards represents a large portion and is the most expensive form of unsecured consumer debt today. According to the Federal Reserve, the average credit card interest rate in 2018 is 16.46% and is likely to rise in the future. Depending upon your credit score and payment history, your particular credit card interest rates may be higher or lower. This credit card payment calculator is designed to help you in budgeting how to payoff your existing credit cards balance total and gain control of your financial life.
Credit cards are open, revolving credit. Your credit card lender establishes a minimum monthly payment amount that allows you to “roll” the remaining balance to the next month payment cycle. Your lender, of course, charges you interest on the remaining balance that is rolled over. These interest payments are the core business model of credit card lenders. It is to your advantage to avoid this roll over and completely pay your monthly credit card balance on time. If so, you have essentially a no cost, interest free consumer loan (excluding annual credit card membership fees).
You can use the credit card payment calculator to approximate the cost to you of only paying the minimum amount on your credit cards. A credit card lender determines your minimum monthly payment as between 3-5% of your current balance total, so this changes every succeeding month. If you do not add any new purchases, your rolling balance total will be reduced and your minimum payment will also be reduced. Simply increase the duration of time that you will payoff your existing balance total until it approximates the 3-5% range. You will be shocked by how long is the duration and how much interest you pay on the balance total. Be disciplined and avoid this at all costs.
Calculate Your Credit Cards Payment
To use this credit card payment calculator, enter your credit cards balance total, the average interest rate and the duration of time you want to payoff your balance total. For simplicity, the calculator assumes that you do not add any additional credit card purchases and that you make your payments on time to avoid any penalty fees being added to your balance total. The calculated results will be your monthly credit cards payment, the total amount to payoff your credit cards and the amount of interest that you paid.
This credit card payment calculator also provides two alternative payments options for you to consider. Option 1 uses a Balance Transfer Card while Option 2 uses a Personal Loan. Depending upon your credit score (to qualify for lower interest rates) and credit cards balance total (to amortize financing fees), these payment options should be considered as credit card debt relief alternatives.
As an example, if you have $3,000 credit cards balance total, with an average interest rate of 16.50%, and your goal is to pay it off in 12 months, you will have to budget paying $273/Month toward your credit cards.
You will find that the most important factors affecting your credit cards monthly payment is the balance total and the duration of time you want to budget to payoff the balance. The credit cards interest rate is determined by the market and is not within your control. Obviously, if you use your credit cards to make new purchases, this will adversely affect you since it will simply add to the balance total you are attempting to payoff.