# Credit Card Minimum Payments Calculator

This calculator will show just how much total interest you will pay if you only make the minimum payment required on your credit card balance. In the fields provided, input the total amount charged on your credit card, its annual interest rate, and the percentage that constitutes a minimum payment on the card, followed by the dollar amount of that payment.

Press CALCULATE, and you’ll see just how much money the minimum payment method is costing you. You’ll discover the total interest charges you’ll have to pay, the number of payments you’ll have to make, and the number of years it’ll take you to pay your card off. If you have a particularly high balance, it will become more than clear how detrimental this approach is to your bottom line.

Your credit card disclosure statement should have something like "your minimum payment will be 2% of the balance or \$10, whichever is higher." These figures are what you will enter in Row #3 and Row #4 respectively.

 Enter the dollar amount charged: Enter the annual interest rate: (3) Enter the minimum percent payment amount: (4) Enter the minimum dollar payment amount: Total interest charges you will pay: Total number of payments you will make: Total number of years until debt is paid off: Estimated foregone interest earnings: Total Estimated Opportunity Cost:

## The Dangers of Minimum Credit Card Payments

Credit cards are a great financial tool when used properly. Credit cards help you build your credit and finance an expense. They are an acceptable form of currency worldwide especially used when you travel. However, if you are unable to pay the balance off right away they become more a burden than a helpful tool.

Unfortunately, too many American's fall into the trap of charging for items they can't immediately afford, and then instead of finding a way to pay off the balance they only make minimum payments. Although you may think that by making a minimum payment you are handling your debt, you are putting yourself in a dangerous financial situation.

Are you asking yourself "how could it possibly be a bad for me to make the minimal amount payments on my credit card bills?" It is a confusing concept when so many credit card companies advertise the many benefits of using their money while only needing to make small monthly payments. However, the choice to make minimal payments comes with dangers. Check out these three negative consequences that come from not immediately paying off your balance and only making minimal payments each month.

### Your Credit Card Costs Go Through the Roof

There are many reasons why it is dangerous only to make a minimum amount credit card payment, but the biggest reason is the amount of money you will spend over time. On average credit card, companies charge between 15 and 20 percent on all balances that carry over and are not paid off. That 15 to 20 percent is not a one-time fee per charge, it is an ongoing charge for the balance each month.

So if you were to charge \$2,500 to your credit card and only pay the minimum payment of \$50, at 15 percent interest it would take you six and a half years to pay this debt off. Additionally, in that six and half years you will have paid \$1,450 in interest. Another way to look at it as you are taking six and a half years to pay 60 percent more than the sale price of the object you didn't want to wait to buy.

Financially speaking, your credit card costs go through the roof by making minimal payments each month, and you are simply wasting your money.

### You Become Overwhelmed With Credit Debt

The thought of having credit card debt or any debt can become quite overwhelming. It is even more overwhelming when you didn't realize how fast it was building up.

Let's assume you have charged that \$2,500 item you didn't want to wait to purchase. Then you choose to make only the minimal payment, and in addition to that you continued to charge for more items. Before you know it, your balance has reached \$8,000 between your other charges and interest. Now your minimal payment has increased to \$320 per month. \$50 per month may have been manageable, but \$320 on top of all of your other bills is overwhelming.

Why would you ever want to put yourself into a place where you become overwhelmed by your monthly bills when you can choose to wait to make purchases until you can afford them?

You might think "I make my minimal payment every month, and I am in good standing with my credit card. Why would making a minimal payment each month cause my credit score to suffer?"

Did you know that 30 percent of your credit score comes from the amount of debt you carry each month? This means the more debt load that you carry, the lower your credit score will drop. Although you stay in good standing with your credit card company, and you do not suffer the negative impact it can have to miss a payment, your credit score is still dropping due to your debt.

Now that you understand the dangers of making minimum credit card payments, do you know what to do to avoid this situation or get out of the cycle you have created?

### Pay Your Balance in Full

Clearly the best thing you can do each and every month is pay your credit card balance off in full. This means instead of buying items you can't afford, wait until you can afford them. Save up the money, charge the item and immediately pay it off. Even when you would rather be saving your money for something else, you would be wiser to pay off your credit card debt first.

### Pay Off Highest Interest Card First

You might be time in your life where you have created some debt, and you are not in a place to pay all the credit card balances off right away. If this is the case, continue making your minimal credit card payments.

Take a look at your debts and find the credit card that has the highest interest rate. Once you have determined which card has the highest rate, begin putting any extra funds you have towards that cards balance. By making additional payments to the high-interest card, you are helping yourself get out of debt quicker than if you just randomly made additional payments to credit cards.

Once you pay the balance off on your highest interest card, move to the next highest and start paying it off. As you continue to repeat this process, you will find yourself out of credit card debt much faster than if you were just to make minimum payments on all of your cards.

Although making a minimal payment is better than making no payment at all, it is not a wise decision. At the end of the day, if you choose to make a minimal payment and not pay off your balance, you are hurting your credit and throwing money away.

Have you ever been in a situation where you were making only the minimal payment each month? How did you handle getting yourself out of debt without incurring all the negative consequences?