Introduction: Best Credit Card Payoff Calculator and Credit Card Minimum Payment Calculator
Credit cards can be both extremely useful financial instruments as well as potentially dangerous to the financial well-being.
On the upside, a credit card can give you or your business easy access to a substantial line of credit. If you dutifully pay off your monthly balance every time you receive a statement, you can also benefit from quality perks and cash back benefits.
If, however, you only settle for making a minimum credit card payment each month, you will most likely find yourself in a steadily increasing debt.
Answering the question, “How is credit card interest calculated?” is important to help you make sound financial decisions regarding how you will use your credit card.
Image Source: Credit Card Repayment
For people who do find themselves in credit card debt and aren’t ready to declare bankruptcy quite yet, finding a credit card repayment calculator online and learning how to use that credit card repayment calculator can help them come up with a plan and a budget to get themselves out of debt.
However, with dozens of credit card minimum payment calculators and other types of credit card debt calculators out there, which one will work best for you?
In this brief article, AdvisoryHQ will first answer the question, “How is credit card interest calculated?”
This can help you understand how credit card companies make their money as well as help you come up with a plan for how long to pay off a credit card that you owe serious money on.
We will then go on to explain what a credit card payoff calculator is and the different uses and functions of these online tools that will help you calculate credit card interest and come up with a payoff timetable.
More specifically, this article will examine a credit card debt calculator, credit card interest rate calculator, credit card monthly interest calculator, and credit card monthly payment calculator.
How Is Credit Card Interest Calculated?
If you have substantial credit card debt and tend to only make the minimum credit card payment each month, chances are that you have asked yourself at some time or another, “How is credit card interest calculated?”
Unfortunately, learning how to calculate credit card interest without the help of a credit card payment calculator can cause some headaches. Your monthly statement may come with a number of technical terms that can sound like a foreign language. To calculate credit card interest without a credit card payoff calculator, you will need to know three basic numbers: your annual percentage rate, your daily interest rate, and your average daily balance.
Your annual percentage rate (or APR) is the easiest number to find out. When you sign up for a credit card, the card usually advertises its APR up front. The APR on credit cards are notably higher than other types of loans offered by a bank and will largely depend on what type of card you sign up for (rewards cards generally have a higher APR) and your credit score.
For our example on how credit card interest is calculated without the help of a credit card minimum payment calculator, let’s say that you have a credit card with a 15% APR. The problem with this number is that instead of being charged interest once a year, credit card companies will charge you interest on a daily basis. When you only make a minimum credit card payment, you are essentially paying interest every day until your balance is paid off.
To calculate your daily interest rate, simply divide 15% by 365 (the days in the year) to get 0.041%, which doesn’t sound all that bad until you start adding up how long to pay off the credit card in days.
Your average daily balance is the average you own on your principle over the course of the month. For example, if you owed $1000 on a card but halfway through the month made a $500 payment, then your average monthly balance would have been $750 dollars. You will need these numbers in order to calculate the credit card interest.
Here is where it starts to get difficult. To calculate the credit card interest without a credit card repayment calculator, multiply your average daily balance by your daily interest rate by the number of days in the month. Our example would look like this: $500 dollars x 0.041% x 30 days to give you a monthly interest payment of $9.23.
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How Long to Pay off a Credit Card?
Once you have figured out how to calculate credit card interest without the help of a credit card payment calculator, it is fairly easy to figure out how long to pay off a credit card. Credit card companies are notorious for offering ridiculously low monthly payments. While these low payments may seem like a perk, you might want to think again.
If we follow the same example as above, and your credit company only asks for a $15 dollar minimum monthly payment, then you will end up paying $$9.23 in interest and only $5.77 in principle.
The next month, you will have to do the same calculations, but instead of a $1,000 balance, you’ll have a $994.23 balance. You should quickly come to the realization that by only making the minimum credit card payment, your credit card debt is going to be with you for a long time.
If you continue to use your credit card and rake up even more debt while still only making minimum credit card payments each month, then the answer to the proverbial question of “how long to pay off a credit card?” could easily be upwards of a decade.
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What Is a Credit Card Repayment Calculator?
A credit card repayment calculator is known by a number of different names, including a credit card payoff calculator and a credit card minimum payment calculator. Essentially, a credit card repayment calculator is a free online tool that can help you quickly and efficiently calculate your credit card interest payments as well as make decisions regarding the best payoff plan.
While it may seem easy enough to calculate your credit card interest payment without the aid of a credit card minimum payment calculator, the best credit card repayment calculators will help you compare different payment plans so that you can find the best way to get out of debt while following your monthly budget.
If, for example, you are currently only making the minimum credit card payment each month, a credit card credit card monthly payment calculator might help you discover that by cancelling your cable subscription and making an extra $50 dollar payment each month, you can erase your credit card debt in half the time.
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Different Functions of the Best Credit Card Payment Calculators
We will review below four different credit card payoff calculators, each with a different specific function to help you better manage your credit card debt.
Credit Card Debt Calculator
A credit card debt calculator is one type of credit card payoff calculator that will help you easily see how long it will take to you to become debt-free if you only make minimum monthly payments.
One of the best credit card minimum payment calculators is offered by the Navy Federal Credit Union here. This credit card minimum payment calculator only asks for simple information that you should be able to find on your most recent credit card statement.
You will need to input data for your credit card balance, your annual percentage rate, and the minimum payment (in percentage points). This credit card minimum payment calculator or credit card debt calculator gives you concise information on how long it will take you to get out of debt by only making the minimum payment.
For example, if you owe $5,000 on an 18.9% APR card that charges a 4% minimum monthly payment, you will need 11 years and 5 months to pay off that interest.
Credit Card Interest Rate Calculator
Consumercredit.com offers a fantastic credit card interest rate calculator that “will show you how much interest you will end up paying if you make only the minimum required payment on your credit card debt. It will also tell you how many minimum payments you will make before your balance is paid off (up to a maximum of 600 payments).”
It can become mind-boggling to see just how much interest compared to principle you end up paying by only meeting the minimum credit card payment each month.
This credit card payoff calculator can help consumers become aware of how paying off excessive interest can hurt them financially and thus help them rework their budget to make larger monthly payments that will cancel out more of the principle each month.
For example, this credit card repayment calculator shows that if you owe $1,000 on a 15% APR card that charges a 2% minimum payment and minimum monthly fees of $15, you will end up paying $851 in interest charges over 9.8 years of monthly payments. This credit card payoff calculator is thus an important tool to help you realize the urgency of getting out of debt as quick as you can possibly afford it.
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Credit Card Monthly Interest Calculator
A credit card monthly interest calculator is another type of credit card repayment calculator that will show you how much interest you end up paying each month on your credit card debt.
Calculatecreditcard.com offers one of the best credit card payoff calculators. This online tool will quickly calculate your interest per day, per month, and per year. For example, if you owe $1,000 on a 20% APR credit card, you would end up paying $0.55 per day, $16.44 per month, and $200 per interest each year.
With this credit card repayment calculator, you can also compare different APRs offered by other credit card companies to find out how much you would save per day, month, and year if you were able to transfer your balance onto another card.
Credit Card Monthly Payment Calculator
A credit card monthly payment calculator is perhaps one of the most useful types of credit card repayment calculators. It allows you the flexibility of choosing different monthly terms to pay off your debt and will show you how much you need to pay each month in order to get completely out of debt.
Bankrate.com offers a quality credit card repayment calculator that can help you find the top repayment plan that works best for your personal budget.
For example, the credit card monthly payment calculator offered by bankrate.com shows that if you owe $1,000 on a 15% APR card and want to get out of debt in 12 months’ time, you will need to make monthly payments of $90.26.
If $90 dollars is too much for your monthly budget, you can try to change the “desired months until debt free” number until you find a figure that fits with your financial capabilities. This credit card payoff calculator is thus a great tool to help you overcome your debt according to your own economic capabilities.
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How Learning to Calculate Credit Card Interest with a Credit Card Payoff Calculator Can Help Get You out of Debt
Getting into credit card debt is easy to do, but getting out of that debt can prove to be a lifelong challenge for many people.
With the help of a credit card minimum payment calculator or credit card payoff calculator, you can easily come to understand the specifics regarding your debt and find the best option to help you get out of debt as quickly as possible.
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