Paying off Credit Cards With Minimum Payments?Written by Johann Erickson
Repaying credit card debt by making minimum payments varies with each credit card company. There are a few things that can help you understand why it is so hard to get caught up paying minimum payment.
First, you need to understand what minimum payment is for your credit card. The minimum amount is how much you are required to pay credit card company every month on your balance due. The rule of thumb with majority of credit card companies is 2 percent of balance that you have due. So, if your average daily balance for month is $2,000 then your minimum payment for that particular month would be $40. That does not seem too bad. But, you also need to know that you are charged interest on balance due also. Some credit card companies charge around 17% interest on your balance due.
Now, you must first understand how they charge interest rate. The interest rate on your credit card is usually referred to by APR or annual percentage rate. The APR is also determined by whether you have a fixed rate or a variable rate. A fixed APR will remain same unless credit card company changes it in writing prior to charging new interest rate. A variable APR changes according to changes in national interest rate.
Okay, now you know your APR, but there are three different ways of calculating amount charged to your credit balance, it will be charged by either average daily balance, previous balance or by adjusted balance.
If you are charged interest by your average daily balance credit card company will calculate your balance by taking debt you had in your account every day during which billing statement covers and average it out it over billing period.
If you are charged interest by your previous balance credit card company will take your balance from previous billing period and use it for determining your interest charges.
| | Transferring balances Between Credit CardsWritten by Johann Erickson
Understanding transferring balances from one credit card to another can be very confusing and may not help your situation at all. You can transfer your credit card balance from card you now have to another credit card that offers a low introductory rate. But, before you do this you should learn more about entire picture.
Some companies offer an introductory rate which can save you some money by transferring your debt from one credit card to another. But, you should learn how long rate will last and what rate will be after introductory rate expires. You may learn that you will in fact be paying more interest than you are now paying. Remember introductory rate is to get your business and it may not last very long. Then you could be in trouble with real interest rate that will begin when this special rate expires.
You should also find out what interest rate applies to. Will it apply to your transferred balances only? What about new purchase? If it only applies to transferred amount, then any new purchases you will be charged a different interest rate. This can also increase your debt instead of decreasing.
Some credit card companies also charge an annual fee above their interest rate fee. You should find out if there is an annual fee, how much it is and when it will be charged. Late fees and over limit fees can be another way that you can be charged more money on a given month. They may even charge a balance transfer fee. All of these are things to consider before you decide on transferring balances from one credit card to another.
Some transfer fees can be as high as 4 percent of balance that you are transferring, while a few credit card companies will cap this amount at around $50 or less, but some do not cap it all.
Transferring balance can be a good idea if you read and understand all terms and agreements of new credit card. You can find good deals out there that will help lower your monthly payments because interest rate is so low, but if they have other fees you may not be any better off than you are not. You could be paying out more than you expected if you do not read all fine print before transferring those funds.
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