Fixed vs Minimum Credit Card Payments
This calculator can provide valuable insight into the cost-effectiveness of paying off a credit card with fixed payments as opposed to minimum payments. In the fields provided, enter your credit card’s principal balance and its annual interest rate. From there, use the pull-down menu to choose the percentage that constitutes the minimum payment on the card (the dollar amount will fill in automatically). Finally, provide a payment that you think you could afford to make every month on the card.
Press CALCULATE, and you’ll quickly see the effect that fixed payments could have on your checkbook. For minimum payments, you’ll see how many payments you would have to make to pay off the card and the amount of interest attached to that method. For fixed payments, you’ll see the number of payments you’ll have to make and the interest attached to that method. Finally, you’ll learn how much money you’ll save in interest. And you’ll discover that the savings are considerable.
Five Ways to Pay Off Credit Card Debt Quicker
Are you trapped under something heavy? Like credit card debt? If you're like most people, you want to pay off your balance as soon as possible. Follow these five tips to get ahead in the credit debt game.
Pay Off the Money Gobblers First
You must pay the minimum due on every card every month. However, it's wise to put any extra money you can toward the card with the highest interest rate.
Chances are that each card in your wallet incurs a slightly different interest rate. Even more confusing is the fact that, on any given card, you could be paying different interest rates for different types of debt.
How do you determine which card is gobbling your money the fastest? According to the Board of Governors of the Federal Reserve System, every credit company charges a purchase APR; that's the amount of interest you pay on your purchases. Your card's introductory APR most likely will be lower; this is the rate you pay during roughly the first 6-12 months of card ownership. Watch out for penalty APR figures on your bill; these are the inflated interest rates you're forced to pay if you violate terms in your card holder agreement, such as making a late payment.
Another important factor in deciding which card to tackle first is whether you're paying a fixed-rate APR or a variable-rate APR. Fixed-rate APRs stay the same for a set period of time. Variable-rate APRs fluctuate based on outside factors. The best way to find out whether you're paying a fixed or variable rate is to scrutinize your bill.
Takeaway: Payoff the cards with higher interest rates first. Your efforts will be worth it in the end.
Consider a Balance Transfer
It may be in your best interest to transfer your balances to a card with a lower interest rate. Called a balance transfer, this provides lots of people with a tactic to save cash.
One option is to transfer debt from a higher interest card to a lower interest card. Another option is to open a new line of credit altogether. This is an enticing idea for many people, and it's fairly easy to find companies that offer a zero-percent interest on balance transfers. The catch: You have to pay a fee upfront for the transfer, and the zero-percent interest rate period will eventually end. Typically, these periods last from six to twelve months.
If you decide to apply for a balance transfer card, find out your credit score first. Some companies won't consider you if your score is "Average" (about 620-679) or below. Other companies will extend credit to those with a lower score, but they may charge an annual fee. If you're not sure you'll be approved for a balance transfer because of a poor credit score, try Googling "balance transfers for bad credit" to find credit companies that are more likely to accept you.
Takeaway: Balance transfers are a popular way to save yourself some short-term cash.
Don't Charge It
Charging purchases to plastic is oh-so-easy, but the consequences prove oh-so-brutal. Some people convince themselves that since they're in debt already, it won't be a big deal to charge a little more. They say to themselves, "I might as well charge it. I'm already in debt." This isn't a healthy way to think about your finances. If you're buried in debt, resist the temptation to dig the hole even deeper.
It's better to chip away at your debt than to slowly add to it. Avoid buying things you don't need. If you don't have a budget in place yet, create one as soon as possible.
Takeaway: Leave your credit cards at home.
Consult a Credit Counselor
Not everyone is a financial whiz kid. If you feel overwhelmed by credit card debt, it might be time to seek the help of a professional credit counselor.
A credit counselor can help you negotiate your debt with creditors. Often, the counselor is able to arrange a lower monthly payment on your behalf. He might even be able to get your interest and other fees reduced or waived.
Before you leap into the arms of a credit counselor, make sure he has all the right credentials. The ideal counselor received accreditation by either the Council on Accreditation (COA) or the International Organization for Standardization (ISO). He should also be certified by the National Foundation for Credit Counseling (NFCC).
When done right, setting up a debt-management plan with a credit counselor costs you little or nothing. If a counselor asks for a larger set-up fee than you can afford, find a different person to help you.
Takeaway: Free or low-cost help is available for those who struggle with debt.
Put Shame Aside
Most of us have the values to make us good, honest people who pay our debts. When bills pile up, shame has a tendency to pile on. A March 2014 poll by the NFCC uncovered that 37 percent of all respondents felt more ashamed of their credit card debt than their age, weight, or credit score.
Feelings of embarrassment and personal failure cause some indebted people to bury their head in the sand. Instead of facing their debt and dealing with it, they ignore it. Bills in the mailbox go unopened. Late fees and unpaid balances snowball into a seemingly insurmountable problem.
In order to tackle your debt, you must accept it - and you must forgive yourself. A lot of people are in the same boat. They're not trumpeting it from the rooftops because, frankly, they're embarrassed too. But credit card debt is not a reflection of your personal worth or moral character. It could be a reflection of some past mistakes, but everyone makes those.
Takeaway: Free yourself of the emotional burden debt causes. You don't deserve the pain, and it gets in the way of solving your problem.
It's important to keep your mind calm and rational when dealing with credit card debt. Follow the advice outlined in this article. Seek help from people you trust. Your goal is to remove this burden from your back. You can do it, but it will take some time. Accept this fact, and move on with your life.