It is easy to go spend crazy whenever you get a new credit card, but before you do, it is important that you understand your credit cards. Understanding your APR, how paying the minimum payment is going to affect you and more will allow you to make better decisions when using your line of credit. In this article, we are going to show you five credit card payment calculators that will allow you to see how different things will affect your credit and the amount of money you will have to pay.
- Credit Karma Debt Repayment Calculator
- CreditCards.com Minimum Payment Calculator
- Greenpath Credit Card Minimum Payment Calculator
- FinancialMentor Credit Card Payment Calculator
- Bankrate Credit Card Minimum Calculator
Using one of a combination of the calculators above will help you see how repaying or not repaying your debt is going to affect you in the long run. Many people do not understand the process of compounding and how it comes into play with the amount of money they will pay in interest. When you understand what paying the minimum payment will do and how long it will take you to pay off your balance when only paying the minimum payment, you will often want to pay more than the minimum required payment.
Understanding APR
APR which stands for annual percentage rate has a lot to do with how much you will be paying out in fees. While you may get offers for a 0% apr credit card, you should know this is only the introductory rate and often only lasts for six months to twelve months depending on the card.
Credit card APR is your interest rate. For new purchases, most credit card issuers offer grace periods meaning if you purchase something and pay it off before the due date, you won’t be charged interest on it. If you carry a balance on your card, you are going to have to pay the agreed-upon interest from the credit card user terms and services.
If you look on your credit card terms, you may find that your interest rate is variable which means it could change depending on an index such as the U.S. Prime index. Your APR may be calculated with the U.S. prime index and with the margin the bank charges added on top of it.
Depending on the APR credit card, the bank may use a monthly or a daily periodic rate. You should also know that there may be multiple APRs charged on your balance. Your statement will show you how interest is calculated so you can know how to spend wisely and not acquire unnecessary fees.
Your annual percentage rate divided by 365 days in the day equals your daily percentage rate. Your DPR is then multiplied by the balance that is subject to the interest rate, and that will equal the interest that is charged.
There are different types of APRs you need to keep in mind as well. Purchase APRs are usually the lowest and are applied to all purchases made through the card. Cash advance APRs are higher than purchase APRs and do not have a grace period. Penalty APRs are usually the highest, and if you get behind on your payment, they can be applied to your entire balance depending on the terms of the card. The most attractive APRs are introductory APRs which only last for a certain time period. They are used to attract you to the card but will not last so make sure you know the true APR that you will be charged when the introductory offer is at its end.
Should You Go Secured or Unsecured?
There are options for both secured and unsecured credit cards. Potential card users without stellar credit scores may opt to go with secured credit cards since they have much better terms for people on the lower end of the credit score scale. Secured cards simply mean that you have to place a deposit before you can use the card and the limit is usually the same as the amount of your deposit. If you show, good behavior the limit may sometimes be raised so paying payments on time and being responsible with your credit cards is vital.
Before You Get Any Credit Card
Before you get any new credit cards, make sure you understand how it is going to affect you and your credit. You need to think about how you are going to use it and which card is the best decision for your needs. While one card might be good for one person with a certain lifestyle, it may not be the best for you. For instance, a travel rewards card wouldn’t be the best choice for someone that doesn’t travel just as a card with an annual fee wouldn’t be a good choice for someone that wants to hold a card only for emergencies.
Conclusion
Understanding your needs and desires and how your credit card is going to work into your life is important. Opting into any credit card without having a plan in place is a recipe for disaster. Make sure to vet every credit card offer that looks good to you before you get the card. While a credit card offer may look good on the surface, it may not be as great once you dig a little deeper into the terms and services of the card user agreement.
