# Credit Card Calculator: Fixed V's Minimum Payment

This credit card calculator calculates how many monthly payments are required to clear a credit card balance if paying a regular fixed amount or the minimum amount. The Credit Card Calculator illustrates how much money you can save my using a fixed monthly budget to repay your credit card early.

## Credit Card Payments

Credit Card payments are typically setup to deduct the minimum monthly repayment, this will normally be calculated as a percentage of the outstanding balance. The below example is for credit card with an outstanding balance of 470 with a minimum repayment of 3% or 5 (whichever is higher).

**Minimum Payment Example:** 470 x 3% = 14.1 or 5 if higher

Repaying the minimum amount is not the best practice and can mean that you spend years repaying your debt and pay far more interest. A more effective way to budget for a credit card and repay it quickly with less interest paid is to use the fixed repayment method.

### Fixed V's Minimum Payments

The beauty of using a fixed payment approach is that you can plan for the monthly expenditure as part of your household budget. You will know exactly how mush is due to leave your bank account and when.

In comparison, repaying the minimum amount will mean that you typically pay slightly less each month (NOT ALWAYS!!!< if the PAR percentage is high, repaying the minimum could actually cause your debt to increase!

The true comparison comes in how you pay off the loan, yes, a credit card is a loan. Minimum payments will only reduce the total of your credit card loan by a very small amount, especially when the minimum repayment amount is 1% or less. Most of your monthly repayment is actually spent on interest rather than repaying the debt. at 1.5%, your monthly minimum payment is split roughly 50/50 on interest repayment and reducing the Principal (the amount owed). Above 1.5% and you are repaying more off the Principal than you are on Interest charges.

### Credit Card Budgeting

Okay, we understand the financial challenge that most people have. Living with debt is not easy, climbing our of the debt hole can seem impossible but you can do it. The key to your financial future is practical planning. You need to set a budget ad stick to it, you will be amazed at how quickly your debt becomes manageable and the prospect of 'Debt Free' becomes a reality. In our illustration above, we mentioned the 1.5% and above golden figure. Most reputable credit card providers use a minimum of 3%, we suggest you budget for 5% if possible. Lets look at another example using the same figures as above.

**Fixed Payment Example:** 470 x 5% = 23.5

23.5 may seem like a large amount but, if you budget for this then you will repay your credit card several years faster than using the minimum repayment approach. If 5% seems too high, try 4%. Whatever you do, the key message is keep those payments fixed.

### Credit Card Calculator

- A credit card balance of 470 has been used in this credit card calculation
- An annual Interest rate of 16.5% has been used in this credit card calculation
- We have assumed that you make twelve credit card payments a year, one per month. You can edit this to increase or decrease the number of credit card payments paid.
- A fixed monthly repayment of 23.5 has been used in this credit card calculation
- The credit card monthly minimum payments have been set as the higher of either 3% of the outstanding balance or a minimum payment of 5

You can review the results of the credit card calculation by:

- Using the drop down menu to view either the Minimum Payment schedule or the Fixed Payment Schedule
- Clicking through the pages of the credit card schedule.

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