Many people want to understand how to calculate their credit card payments. Knowing the details can help in making smart decisions and managing your debt. Good debt management starts with understanding how to calculate payments and how the debt is reduced with each payment (or lack thereof).
Minimum Payment
Start by finding out the minimum payment required by your credit card company. This figure is typically determined based on your balance.
Interest First
When you make a payment, your loan balance may not always decrease by the amount you pay. Your balance probably won’t decrease by $100 if you make a $100 payment – unless you have a 0% interest loan with no fees or other costs. Every payment you make also goes toward the credit card company’s interest rate and other loan fees.
Principal
After you pay the interest, the remainder of your payment goes toward your debt – also known as the “principal” portion of the loan or credit balance. Subtract the interest fees from your total payment to see how much principal you are paying in any given month.
Several Months, Several Accounts
You now know how to calculate the payment and interest fees for just one month, but how can you calculate it over longer periods? It’s easier to use a spreadsheet or a manually built table to see the complete process of your debt repayment. The idea is similar to an amortization schedule for mortgages or car loans: each row represents one payment.
Changes in Pattern
Now you have a basic understanding of how most credit card payments work, but every credit card company is different, and your card may have different features. Based on what you’ve already learned, you should be able to figure out how to calculate your debt repayment with almost any credit card company.
Frequently Asked Questions
Should I pay off my credit card balance in full every month or should I leave a balance?
How long will it take to pay off my credit card balance if I only make the minimum payment each month?
How is the minimum payment for a credit card calculated?
Thank you for using our site! We hope this information helps you understand how to calculate credit card payments and their costs.
Sources:
– Federal Trade Commission. “Paying Down Credit Card Debt”
– Federal Trade Commission. “Minimum Payments on Credit Cards”
– Consumer Financial Protection Bureau. “What Is a ‘Daily Periodic Rate’ on a Credit Card?”
– National Credit Union Administration. “Paying Off Credit Cards”
– Experian. “Will Paying My Credit Card Balance Every Month Help My Credit Score?”
– Capital One. “Credit Card Minimum Payments Explained.”
– Experian. “How Is Your Credit Card Minimum Payment Calculated?”
Source: https://www.thebalancemoney.com/calculate-credit-card-payments-and-costs-315644
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