Most of us are addicted to using credit cards and when we shop around with the plastics in hand, we mostly tend to forget that we have to repay the amount in order to avoid falling in debt due to accumulating interest rates. Every credit card company requires you to pay a minimum monthly payment on the credit cards and once you can’t pay this amount, you start incurring a huge amount of debt due to interest rate hikes, accumulation of the penalty fees and the late charges. Did you ever hear of a credit card minimum payment calculator? Well, if answered yes, well and good, and if answered no, here are some points that you need to know about this financial tool.
What is the minimum monthly payment on the credit cards?
Whenever you use your credit cards to purchase things, you’re supposed to repay the balance amounts in a particular month. While you’re supposed to repay the entire balance, you’re also supposed to pay back the minimum monthly payment on the cards. This is nothing but a percentage of the total present outstanding balance or the sum of the interest rate and 1% of the principal amount. The credit card companies usually set a cap on the minimum monthly payments so that they don’t fall below a certain level. As you pay off the balance, the minimum payment also decreases but if you keep on making just the minimum monthly payments on your cards, you’ll probably take a long time to repay your debt.
Using a credit card minimum payment calculator efficiently
The main purpose of using a credit card minimum payment calculator is to compute how long you will take to pay off the entire credit card balance if you keep on making just the minimum monthly payments. In order to use this financial tool, you’ll need your present balance, the interest rates that you’re paying and the payment percentage for all the minimum payments that you have on each credit card. As you enter these, the calculator will immediately show you how long you may take to pay off the credit cards. You will get all such information on your account agreement or on the monthly billing statement. It will be mentioned “your minimum payment is 3% of the balance or $25, whichever amount is more”.
So, if you don’t want to remain in credit card debt for a long time, you should ensure using a credit card minimum payment calculator so that you know the exact time that you may take to get out of debt. Also try to pay more than just the minimum monthly payments so as to become debt free sooner.