Credit Card Payment Calculator

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.

Credit Card Balance Payment Strategy

Payment Discipline And Consistency

If you have an outstanding credit card balance, you have a debt problem. It is painfully simple to understand. Credit cards allow you to pay for things now that you cannot afford to pay for in cash. You either are living “beyond your means” or you have had a life emergency that required the use of credit cards due to insufficient savings. They are many reasons as to why you and others like yourself have gotten to this financial situation.

Now it is time to make changes to regain control of your financial life. Here are recommendations:

  • Acknowledge and understand you have a credit card debt problem. It adversely affects you in many ways. Resolve to solve your debt problem.
  • Create a budget of your income and payments. Use our debt-to-income-ratio calculator as a guideline to know where you stand.
  • Your credit card accounts will no longer be available for any future purchases. Put them physically away.
  • All non-discretionary (must pay) electronic payments (electricity) should be transferred from a credit card account to your bank debt card. You will no longer be using credit for non-discretionary payments.
  • Make a list of all your credit card accounts ordered by smallest to largest account balance. Determine what is the total amount of minimum monthly balance payments. To this total add 15-20%. This is your monthly budget for paying your credit cards balance total. If you can increase the budget more, the better.
  • You will pay all your credit card accounts their minimum payments, with the exception of the smallest account balance. The smallest account balance receives all the surplus remaining in your monthly budget. This account will be paid off first. Once you have completed paying off this credit card account you have achieved a small victory. Congratulations.
  • This cycle continues, eliminating another credit card account and freeing up that amount of payment for the remaining accounts. This is referred to as the snowball payment strategy.

Avoid taking on more debt. You cannot reduce your credit card balance total unless you stop using your credit cards. Don’t add to your problem. Be focused and disciplined.


Credit Card Balance Payment Alternatives

Debt Relief Alternatives

Credit card debt is an unsecured personal loan from the credit card issuer. This is a type of revolving debt with high interest rates, established credit limits and monthly payment obligations. There are various debt relief alternatives to deal with this type of unsecured debt. Listed below are various for you to consider:

Credit Card Balance Transfer

This is a form of debt consolidation. Many lenders offer this type of credit card to consolidate unsecured debts. You use this type of card to consolidate your existing credit card balances to this new credit card. These types of cards offer special “teaser” 0% APR introductory rates on balance transfers, giving you a limited time to pay off debt interest-free. At the end of the introductory period, the balance transfer credit card APR will increase and may be higher than what your are currently using. You need to account for lender balance transfer fees when determining the total cost to cost of consolidating your credit card debt.

Debt Consolidation Loan

This is also a form of debt consolidation. You take out an unsecured personal loan at a lower interest rate than your existing credit card debt. You use the funds from the loan to consolidate and pay off your existing credit card balances. This leaves only the low-interest loan to repay. You need to account for lender loan origination fees when determining the total cost of consolidating your credit card debt.

Home Equity Line Of Credit

This is also a form of debt consolidation. You take out a secured personal loan using your house equity as collateral. The interest rate will be less than an unsecured personal loan. The manner of use is the same in consolidating your credit card debt. However it is not recommended since you risk loss of your house in case of payment default.

Debt Management Program

This is offered as part of a Consumer Debt Counseling service. Essentially it is a centrally administered payment plan for unsecured debts by a credit counselor. You fund a budget for creditor payments, but the credit counselor does the communicating and directing of payments with your creditors. There is a setup fee and monthly administrative fee for the service.

Debt Settlement

This is debt reduction rather than debt consolidation. It is the process of resolving delinquent unsecured debt for far less than the amount owed by promising the lender a substantial lump sum as full payment. Debt settlement comes into play only with your unsecured debt like credit cards, medical bills and personal loans. This debt relief option will help you only if you have a financial hardship and have little likelihood of repaying your creditors.

Debt Bankruptcy

Filing for debt bankruptcy is the ultimate, last resort of credit card debt relief. You may feel like you are admitting defeat, but there are many cases where this is really the best option for you to get out of debt and start over. In fact delaying the decision of filing debt relief bankruptcy will risk more financial losses and cause more damage to your credit history. However debt relief bankruptcy is a complex, legal debt relief process that requires expert advice to ensure that you achieve the best outcome and move forward with your financial life.

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