Credit Card Minimum Repayment Calculator

Understanding Credit Card Minimum Repayments

Credit card minimum repayments are the smallest amount you're required to pay each month on your credit card balance. While making only minimum payments can seem convenient, it can lead to long-term debt and significant interest costs.

How Minimum Repayments Work

Typically, minimum repayments are calculated as a percentage of your outstanding balance (usually 2-3%) or a fixed amount (e.g., $25), whichever is greater. The exact calculation can vary between credit card providers.

Impact of Making Only Minimum Repayments

Making only minimum repayments can have several consequences:

• Extended repayment period: It can take years to pay off your balance.
• Higher interest costs: You'll pay more in interest over time.
• Reduced credit score: High credit utilization can negatively impact your credit score.

Calculation Example

Let's consider an example with the following details:

• Credit card balance: $5,000
• Annual Percentage Rate (APR): 18%
• Minimum repayment: 2% of balance or $25, whichever is greater

In this scenario:

1. Initial minimum payment: $100 (2% of $5,000)
2. Time to pay off balance: Approximately 30 years
3. Total interest paid: About $11,600

Benefits of Paying More Than the Minimum

Paying more than the minimum can significantly reduce both the repayment time and total interest paid. For instance, if you increase your monthly payment to $200 in the above example:

• Time to pay off balance: About 2.7 years
• Total interest paid: Approximately $1,530

Tips for Managing Credit Card Debt

1. Always pay more than the minimum when possible
2. Create a budget to allocate more funds to debt repayment
3. Consider balance transfer options to lower interest rates
4. Avoid adding new charges to the card while paying off the balance