CREDIT CARD PAYMENT PLANNER

Written by redbalmeo on 4:39 AM

Everyone or almost everybody has this plastic thing that gives you the power to spend even without carrying a cash. Yes, it's no other than the credit card. Credit card are used to be a thing for the rich. But now, almost everyone can have it. Students can have it too. There are even agents calling houses offering their credit card with statements like waived annual fee, zero percent balance transfer, etc. This phenomenon has created a nation spending more than what they earn. The end scenario? credit card debt, debt and debt...

Since we are not aware what we have spent already, we tend to spend, spend and spend. Too late do we realize that we're heavily indebted already. If we cannot pay anymore? The credit card is taken away and what are we left with? credit card debts of course. Then we call the credit card company and tell we cannot pay anymore. They are generous to offer installment payments, so we decide to pay them little by little until we settle the full amount.

The question is how much should we pay for our credit card debt? The minimum payment required? It is not the optimal amount to pay. Why? Because if we pay them only minimal amount, a portion of that payment goes to interest and what remains is applied to the principal. We end up paying only for the interest of our credit card debt and our debt continues to grow. What to do? Pay the optimal amount. The amount by which most of your payment goes to paying the principal amount. It is only this way that our credit card debt is reduced little by little.

So what is the optimal amount to pay your credit card debt? The answer varies... It depends on your paying capacity. Take the following example:

Figure 1. If we don't pay the optimal amount for our credit card debt, our debt will continue to grow and we will end up paying only for the interest.

Figure 2. An example of optimal payment. We are not constrained of paying 3,000 for a 30,000-credit card debt. But this is an optimal payment since our payment covers more of the principal than the interest. By paying this way, our debt decreases little by little until we settle the full amount.

So what really is the optimal payment? Again it is in your discretion. Download this free excel file called CREDIT CARD PAYMENT PLANNER to help you decide what optimal payment is for you.

The following are the screenshots of the file.

1. With this excel file (credit card payment planner), you can set the amount of payment and see whether you are paying optimally
2. You can know how long it will take you to pay your whole debt with your set monthly payment